Effective July 19, the Financial Services Commission (FSC) of South Korea has implemented a new law that is designed to enhance the protection of virtual asset users.
This law, the Virtual Asset User Protection Act, expands upon the regulations that were implemented in March 2021. These regulations mandated that virtual asset service providers (VASPs) register with financial authorities and comply with anti-money laundering standards.
Issues such as asset safety and unethical trading practices are addressed by the new act, which was passed on July 18 of last year, thereby enhancing the supervision of VASPs.
Key provisions include the mandatory segregation of user funds, the establishment of insurance or reserve funds to mitigate risks such as cybercrime, and the strict monitoring of transactions to identify and report suspicious activities.
It is now mandatory for VASPs to maintain consumer deposits at banks and pay interest on these funds. Additionally, they are required to maintain comprehensive records of user assets and are subject to more stringent inspections and penalties for noncompliance.
These enhanced regulations are intended to establish a more secure environment for virtual asset consumers, as stated by the FSC.
Nevertheless, they underscore that the new regulations provide heightened protection; however, risks persist, particularly in the context of transactions involving unregistered service providers or peer-to-peer exchanges.
Also Read: Coinbase Bank Hack Exposes Customer Data
Wallets