TechFlow reports, citing The Block, that South Korea's first comprehensive cryptocurrency regulatory framework has now fully taken effect, with a focus on investor protection. The new law, the "Virtual Asset User Protection Act," was officially passed on July 18, 2024, and included a one-year grace period to finalize regulatory details.
The legislation imposes stricter requirements on digital asset exchanges. Cryptocurrency exchanges in South Korea are now required to store at least 80% of user deposits in cold wallets, thereby segregating customer funds from exchange-operated funds. Exchanges must also entrust users' fiat deposits to locally licensed banks and maintain cryptocurrency reserves matching the quantity and types of customer holdings. Additionally, crypto service providers in South Korea are now required to secure sufficient insurance or establish reserve funds to cover potential losses from hacking incidents or liquidity crises.
Besides measures for safeguarding user assets, the law mandates exchanges to implement real-time monitoring systems to detect and report suspicious or potentially illegal trading activities. Companies failing to comply with the new rules may face penalties from the Financial Services Commission (FSC) or have their services suspended.
