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Tuesday, April 23, 2024

South Korea Imposes Severe Penalties with New Crypto Regulatory Law

In a ground-breaking move that signals a serious response to illicit activities in the cryptocurrency sector, South Korea has announced the impending implementation of stringent crypto laws, with penalties as grave as life imprisonment for severe offenses. 

This law marks a significant milestone in the regulatory landscape for cryptocurrencies, reflecting South Korea’s determination to curtail criminal activities in this burgeoning financial sector.

South Korea Crypto Regulatory Law
Credit: DepositPhotos

Stepping up the Game

According to the South Korean Financial Services Commission (FSC), the incoming legislation – the Virtual Asset User Protection Act – has profound implications for those involved in illegal activities within the crypto market. 

Transgressors risk one-year imprisonment or fines amounting to three to five times the illegal gains derived from their activities. 

For those convicted of exploiting the system to illicitly amass over 5 billion Korean Won (circa $3.76 million), the penalties could be as severe as a life sentence or a fine twice the amount gained.

“If the unlawful gains surpass the 5 billion Korean Won mark (approximately $3.76 million), a life term or a fine twice the illegal gains would potentially await those who’ve crossed the line,” reveals Seung-jin Yoo from the Korea Development Institute.

This substantial move demonstrates South Korea’s stern approach towards industry malfeasances such as market manipulation, fraudulent transactions, and usage of undisclosed information for investment purposes.

Protecting User Assets

This novel law entails additional features targeting user safety. Cryptocurrency service providers will be mandated to retain more than 80% of user deposits in cold storage. This requirement ensures a high degree of protection for user funds while limiting the risks associated with security breaches.

Moreover, the legislation necessitates the enrollment of service providers in insurance programs. This arrangement is designed as a buffer to compensate for potential user losses in the event of security breaches.

Towards Regulatory Framework Standardization

Crypto Regulatory Law
Credit: DepositPhotos

The introduction of the Virtual Asset User Protection Act is the first phase of a two-part legislative initiative striving to establish a comprehensive regulatory framework for South Korea’s cryptocurrency industry.

The second half, currently being orchestrated, will provide a standardized approach for crypto token issuance while enforcing the transparent disclosure of investment-related information. 

The overarching purpose of this twofold approach is to create an accountable, well-monitored, and user-friendly crypto ecosystem in the country.

Kit Young, a Seoul-based fintech analyst comments, “South Korea’s legislative approach makes a powerful statement about the government’s commitment to establishing order within the crypto market, while ensuring the protection of users’ assets.”

Expected to come into force on July 19, 2024, this pivotal legislation will usher in a novel chapter in the narrative of cryptocurrency regulation in South Korea. 

This move is anticipated to echo globally, possibly inspiring similar initiatives across nations grappling with the rising complexities that cryptocurrencies bring along. 

The South Korean exemplar proffers a promising case study for nations eyeing the challenges and opportunities of this burgeoning financial sector.

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