As a seasoned crypto investor based in South Korea, I’ve witnessed the volatile nature of this market and the risks that come with it. The recent collapse of Terra-Luna and FTX, which significantly impacted our country, served as a wake-up call for regulators to take action and protect investors like myself from potential losses.
The significant cryptocurrency regulatory framework of South Korea has been activated, aimed at protecting investors within the country.
Under the new framework, Virtual Asset Service Providers (VASPs) face stricter regulations, known as the Protection of Virtual Asset Users (PVAU). This means that VASPs must keep at least 80% of their clients’ digital assets in cold storage.
The Financial Services Commission (FSC) intends to designate trustworthy financial institutions for managing fiat deposits given to Virtual Asset Service Providers (VASPs). Moreover, it is mandatory for VASPs to keep their customers’ funds distinct from their own and invest them in low-risk assets to produce returns.
In the unfortunate scenario where a cryptocurrency exchange faces bankruptcy, this measure guarantees that customers’ funds will be paid back directly by the involved financial institutions.
In response to the significant losses caused by the failure of Terra-Luna and FTX, costing billions of dollars in customer funds, these actions have been taken. The demise of these entities had a profound effect on South Korea, with FTX experiencing over 6% of its user base coming from East Asia.
As a financial analyst, I would add that in addition to complying with the stated regulations, Virtual Asset Service Providers (VASPs) must ensure they are adequately insured or have established a reserve fund. This measure is designed to protect against potential losses due to cyberattacks or liquidity shortages.
Additionally, the legislation grants VASPs (Virtual Asset Service Providers) the authority to limit deposit and withdrawal functions for users under specific circumstances, providing an extra layer of control against suspicious transactions.
The Financial Supervisory Service (FSS), acting on behalf of the Financial Services Commission (FSC), has partnered with cryptocurrency exchanges to launch a real-time monitoring system. This system is designed for continuous surveillance of suspicious transactions starting from July 19, in conjunction with the User Protection Act.
According to the regulatory body’s assertion, this cryptocurrency monitoring system is expected to handle approximately 99.9% of the nation’s crypto trading activity. In case of any irregularities detected, it is mandatory to relay the information to the Financial Supervisory Service (FSS) instantaneously through a designated data communication channel.
In the beginning of July, twenty-nine cryptocurrency trading platforms such as Upbit, Bithumb, Coinone, Korbit, and Gopax registered with the Financial Services Commission (FSS) concerning this matter.
The Ministry of Economy and Finance in South Korea has put off the planned implementation of a 20% tax on crypto gains, originally scheduled for early next year. Reports indicate that the country’s ruling party is pondering over a possible postponement until 2028.
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2024-07-19 12:26