As an experienced financial analyst, I believe the new regulations announced by the Financial Services Commission (FSC) in South Korea are a positive step towards enhancing user security and trust in the Korean cryptocurrency market. The requirement for Virtual Asset Service Providers (VASPs) to segregate customer deposits from their operational funds and store at least 80% of users’ digital assets in cold storage will significantly reduce the risks associated with potential exchange insolvencies.
Beginning next month, South Korean cryptocurrency investors will enjoy greater security as the government implements new regulations to strengthen protection for users if a cryptocurrency exchange goes bankrupt.
The Financial Services Commission (FSC) revealed on Tuesday that a new enforcement rule, scheduled to begin on July 19, forms part of a larger plan to oversee the digital asset sector in the country.
At a cabinet meeting on June 25, the government gave its approval for a new enforcement decree relating to the Act on the Protection of Virtual Asset Users. The Financial Services Commission made this announcement.
— Financial Services Commission – FSC Korea (@FSC_Korea) June 25, 2024
As a financial analyst, I would recommend that Virtual Asset Service Providers (VASPs) implement a policy to keep their customers’ deposits separate from their own operational funds. This means storing the deposited assets in trust accounts or similar arrangements with established and reliable financial institutions. By doing so, VASPs can enhance transparency, reduce potential risks, and increase overall security for their clients.
By implementing this measure, South Korea seeks to minimize the dangers of exchange bankruptcies and, as a result, strengthens the faith of users in the South Korean digital currency industry.
One method of enhancing protection involves mandating Virtual Asset Service Providers (VASPs) to keep at least 80% of their clients’ digital assets in cold storage. Cold storage refers to offline systems, renowned for their robust security features, which effectively shield against hacking attempts and accidental losses.
Based on the level of security provided by a Virtual Asset Service Provider (VASP), regulatory bodies could demand more stringent cold storage requirements to prevent potential fraudulent actions or unexpected shutdowns.
The decree not only strengthens user security but also imposes severe consequences for dishonest and deceptive behaviors in the cryptocurrency sector.
Individuals who take advantage of systems for illicit gains may be punished with a mandatory minimum term of incarceration for one year or monetary penalties equal to five times the unlawful earnings derived from their actions.
The decree grants VASPs the authority to limit deposit and withdrawal functions for users under specific circumstances, providing an additional layer of regulation against suspicious transactions.
South Korea has been increasing its efforts to take legal action against individuals who deceive crypto investors and steal their funds.
On May 21st, the South Korean authorities apprehended 19 individuals who were part of a deceitful social media clique. This group had successfully swindled more than 300 unsuspecting investors out of approximately $19 million.
South Korea’s absence of an established tax system for crypto profits creates lingering doubt due to the government’s ongoing deliberations on the issue.
Despite this, tax officials remain vigilant, expressing apprehensions over the potential misuse of cryptocurrencies for tax evasion purposes.
I came across an interesting piece of news on crypto.news dated February 22. According to the report, authorities in a South Korean province managed to seize approximately $4.6 million in cryptocurrencies from around 2,300 individuals under suspicion of tax evasion over the past year.
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2024-06-26 13:47