South Korea to Bring Strict Digital Assets Act With Life Imprisonment for Violators

The latest reports coming from South Korea suggest that the country is all set to introduce stricter regulations against crypto market manipulation and illegal trading. If the amount of unfair profits derived from crypto profits exceeds 5 billion won, the violators can face up to life imprisonment. The development comes soon as Bitsonic CEO faced 7-year prison for conducting a 10-billion won fraud.

South Korea’s Virtual Asset User Protection Act

In a recent announcement, the Financial Services Commission revealed its proactive measures ahead of the scheduled implementation of the Virtual Asset User Protection Act on July 19. The commission issued a legislative notice regarding the Enforcement Decree of the Virtual Asset User Protection Act and the Virtual Asset Industry Supervision Regulations by the 22nd of the preceding month.

The Enforcement Decree and supervisory regulations outlined in the notice aim to address various concerns within the virtual asset landscape, particularly focusing on prohibiting market manipulation, illegal trading practices, and the misuse of undisclosed material information related to virtual assets.

To ensure compliance, severe penalties are stipulated for violations of these regulations. Offenders may face criminal prosecution, including imprisonment for a minimum of one year, or fines ranging from three to five times the amount of illegal profits. In cases where unfair profits exceed 5 billion won, perpetrators may face a maximum sentence of life imprisonment, coupled with fines equivalent to twice the amount of unfair gains.

Crypto Exchanges To Implement Rules

In efforts to bolster consumer protection within the virtual asset realm, business entities, including virtual asset exchanges, must now adhere to stringent regulatory directives issued by financial authorities.

As outlined in the Virtual Asset User Protection Act, virtual asset exchanges must ensure the secure management of user deposits held in banks for virtual asset transactions. Additionally, they must securely store over 80% of users’ virtual assets’ economic value in offline storage, distinct from internet-connected systems, to mitigate risks like hacking or system failures.

To counter potential risks, such as hacking or system failures, virtual asset exchanges must either acquire insurance coverage or set aside reserves equivalent to over 5% of the total economic value of virtual assets, excluding those stored offline. These measures will mitigate potential losses and safeguard users’ assets in unforeseen circumstances.

South Korea will oversee compliance with the Virtual Asset User Protection Act, conducting routine inspections of virtual asset business operators to ensure adherence to regulations. In cases of suspected violations, authorities may also request data and statements from relevant parties to probe unfair trade practices like price manipulation.

Furthermore, in cases of non-compliance, South Korea’s Financial Services Commission has the authority to take various measures against offending virtual asset business operators. These actions may include business suspension, corrective orders, legal complaints, or referrals to law enforcement agencies, demonstrating the government’s dedication to maintaining regulatory standards within the virtual asset industry.

While implementing stricter crypto rules, South Korea is making sure that it doesn’t stifle crypto innovation. South Korea’s Financial Supervisory Service (FSS) is in discussion for allowing spot Bitcoin ETFs after the US launch last month.