New regulations aimed at protecting users who purchase and store cryptocurrencies at Virtual Asset Service Providers (VASPs) went into effect on July 19, announced by South Korea’s Financial Security Supervisory Service.
According to a July 17 statement from the Financial Services Commission (FSC), titled the “Virtual Asset User Protection Act,” VASPs must take several measures to protect users’ cryptocurrencies.
These include requirements to insure users’ crypto assets against hacks and malicious attacks, segregate customers’ crypto assets from exchange assets, and “keep customer deposits safe in the bank.”
VASPs are also required to maintain a certain level of due diligence to prevent money laundering on their platforms and report suspicious transactions to regulators.
“VASPs must maintain a system to monitor suspicious transactions at all times, and if suspicious transactions occur, they must immediately report them to the Financial Supervisory Service (FSS),” it states.
He added, “If unfair trade practices are discovered through an investigation by financial and investigative authorities, they may be subject to criminal punishment or fines.”
Concerns Raised Among Korean Cryptocurrency Exchanges
Recently, South Korean cryptocurrency exchanges have expressed concerns that the regulations will lead to the delisting of many tokens at once.
On July 3, Cointelegraph reported that 20 South Korean cryptocurrency exchanges will review a total of 1,333 cryptocurrencies over the next six months as part of a new cryptocurrency user protection law. This means that “it is unlikely that all cryptocurrencies will be delisted at once,” according to the Digital Asset Exchange Alliance (DAXA).
Related: South Korean Government Launches Cryptocurrency Transaction Monitoring System
Meanwhile, South Korea’s ruling People Power Party has officially proposed to postpone the implementation of taxes on cryptocurrency trading profits.
On July 12, the party submitted a proposal, citing the current deteriorating sentiment towards crypto assets. The explanation stated that imposing taxes on virtual assets too quickly is “not advisable at this time.”
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