Commencing from the upcoming month, cryptocurrency investors in South Korea are set to enjoy enhanced safeguards with the government’s sanction of fresh regulations designed to bolster user protection in case of a cryptocurrency exchange going bankrupt.
The Financial Services Commission (FSC) unveiled on Tuesday that the enforcement decree, scheduled to become effective on July 19, forms part of a broader endeavor to oversee the nation’s digital asset market.
Mandated by the decree is the directive for Virtual Asset Service Providers (VASPs) to segregate customer deposits from their operational funds, thereby ensuring these funds are safeguarded in reputable financial institutions.
This move by South Korea is aimed at mitigating the risks linked to potential exchange insolvencies, ultimately fostering user confidence in the Korean cryptocurrency landscape.
Moreover, additional security measures entail the stipulation for VASPs to house a minimum of 80% of users’ digital assets in cold storage—a secure offline system known for its resilience against cyber breaches and asset losses.
Depending on the security posture of a VASP, regulators retain the prerogative to impose an even stricter cold storage protocol to alleviate risks associated with fraudulent activities or operational shutdowns.
Aside from fortifying user safety, the decree ushers in stringent penalties for deceitful and manipulative maneuvers within the crypto sphere.
Perpetrators engaging in exploitative schemes could be liable to a minimum of one year’s imprisonment or fines reaching up to five times the illicit gains amassed from their schemes.
In related news, South Korea plans to reassess numerous crypto listings in light of a new law, as per a report. The mandate further encompasses provisions for VASPs to curtail user deposits and withdrawals under specified circumstances, thereby exerting greater oversight over anomalous activities.
Recent times have seen South Korea intensifying legal actions against scammers defrauding cryptocurrency investors of their assets.
On May 21, South Korean authorities apprehended 19 individuals from a fraudulent social media chat group that had deceived more than 300 investors into relinquishing almost $19 million.
While South Korea is yet to formalize taxation policies concerning cryptocurrency profits, the ambiguity surrounding the adoption of such levies has precipitated uncertainty.
Nevertheless, tax authorities are closely monitoring the landscape amid apprehensions that cryptocurrencies are being exploited to evade tax obligations.
An article by crypto.news on Feb. 22 highlighted the successful recovery of $4.6 million worth of cryptocurrency in a South Korean province over a year from 2,300 suspected tax evaders.
For additional reading, check out the news regarding a South Korean bank employee embezzling $7.5 million to invest in cryptocurrency.