South Korea Passes Inaugural Standalone Crypto Bill After Spate of Scandals

Do Kwon’s fall, crypto crime spurred regulation in South Korea || Officials around the world are stepping up oversight of crypto

At the 407th National Assembly plenary session held at the National Assembly in Yeouido, Seoul on the afternoon of the 30th, the 'Act on the Protection of Users of Virtual Assets' is being passed.

South Korea approved its first standalone digital-asset bill to boost investor protection just over a year after the implosion of tokens created by countryman Do Kwon exacerbated a $2 trillion crypto-market rout.

Parliament on Friday passed the Virtual Asset User Protection legislation, which integrates 19 crypto-related bills, after a prolonged delay. The code defines digital assets and imposes penalties for transgressions such as the use of nonpublic information, market manipulation and unfair trading practices.

The legislation gives the Financial Services Commission the power to oversee crypto operators as well as asset custodians. The Bank of Korea would also be able to probe such platforms. The act requires insurance coverage, reserve funds and necessary record keeping. The rules cover assets such as Bitcoin, while existing capital-markets law applies to tokens deemed securities.

Aside from the Kwon fallout, investors were separately reminded of the lingering risks in the digital-asset sector when two crypto lenders with links to South Korea halted withdrawals in quick succession in June.

In March, a high-profile Seoul murder case linked to crypto investment losses stoked calls for politicians to accelerate new rules.

Law ‘Stuck’

“We welcome the authorities’ attempt to build order,” said Lee Suh Ryoung, chief secretary general of the Korea Blockchain Enterprise Promotion Association in Seoul. “But the law in general remains stuck in the perspective of traditional finance in terms of regulating crypto,” which may suppress the industry rather than promote it, he said.

Back Hyeryun, chair of the National Policy Committee at the South Korean parliament, has said that the new rulebook will focus on protecting investors for now and will gradually expand to provide wider oversight.

South Korea’s monthly spot crypto trading volume sank to about $38 billion in April from a peak of nearly $200 billion two years ago, figures from CCData show. But the nation remains well-known for periodic virtual-asset manias.

Jurisdictions around the world are stepping up efforts to regulate digital assets. Places like Hong Kong and Dubai are seeking to attract crypto investment, while the European Union recently passed its landmark Markets in Cryptoassets (MiCA) regulation. US agencies have implemented a crackdown after a string of blowups, including the FTX exchange’s bankruptcy.

Hooyeon Kim(2023.06.30) “South Korea Passes Inaugural Standalone Crypto Bill After Spate of Scandals”
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