South Korea Launches Landmark Crypto User Protection Law

SEOUL, South Korea - South Korea will implement a new law aimed at protecting cryptocurrency users and enhancing market integrity, the country's Financial Services Commission (FSC) said.

The Virtual Asset User Protection Act, which takes effect on July 19, introduces measures to safeguard user deposits, combat market manipulation, and grants regulators new oversight powers over crypto businesses.

Under the law, crypto exchanges must separate user assets from their own and maintain cold wallets storing at least 80% of user cryptocurrencies. 

They are also required to take out insurance or maintain reserves against potential hacks or system failures.

The FSC gains authority to supervise and sanction crypto businesses, while suspected market manipulation cases can now lead to criminal penalties and fines.

"This law provides a basic safety net for virtual asset users," an FSC official said. 

"However, it does not guarantee the safety of cryptocurrencies themselves, and users should remain cautious of their high risks and volatility."

The new regulation follows a year-long preparation period after the law's enactment in July 2023. 

It builds on earlier anti-money laundering rules introduced for the sector in 2021.

Crypto businesses will need to continuously monitor for suspicious transactions and report them to authorities. 

The FSC said it would work closely with investigative agencies to enforce the new rules.