South Korea has recently rolled out new regulations for the digital asset industry as Asian nations continue to welcome crypto. However, the new virtual asset legislation could change the way crypto companies operate in the county.
On July 3, blockchain analytics and compliance company Chainalysis detailed the implications of South Korea’s inaugural standalone crypto bill.
South Korea Crypto Regs Rolled Out
On June 30, the South Korean National Assembly passed the Virtual Asset User Protection Act. It is the first standalone legislation for digital assets that establishes key safeguards for crypto traders and users.
South Korean financial regulators have mandated the supervision of virtual asset services providers (VASPs.)
This oversight includes entities facilitating the purchase, sale, exchange, transfer, and storage of crypto assets. These include brokers, platform operators, and custodians, confirmed Chainalysis.
It added that the Bank of Korea can also request data from these businesses. This would be under necessary circumstances for “monetary and financial stability and the smooth operation of payment and settlement systems.”
Some of the user protections include requirements that the customer’s fiat must be held at a bank or licensed institution. This is to protect them against the collapse or closure of the crypto exchange or firm.
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Furthermore, users’ crypto will need to be segregated with a “stipulated percentage” needing to go into cold wallets.
Additionally, crypto companies in South Korea will need to have insurance covering their reserves to shield customers against “loss of virtual assets from theft or technological failure.”
Insider trading, collusion, wash trading, and other market abuse are explicitly prohibited. Moreover, “VASPs are not permitted to trade in tokens issued by themselves or related entities,” clarified Chainalysis.
The regulations are very similar to what Hong Kong rolled out last month.
However, industry executives such as the chief secretary general of the Korea Blockchain Enterprise Promotion Association, Lee Suh Ryoung, were not so enthusiastic.
“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.
Asian Nations Rushing to Regulate
Despite the apparent harshness of the new rules, nations across Asia are scrambling to establish regulatory frameworks for the asset class.
Hong Kong launched its new legislation for VASPs last month and is now planning to establish a regulatory framework for stablecoins.
Japan has also ramped up its crypto regulations as it competes to become a regional digital asset hub.
Singapore has also issued payment licenses to a number of US companies recently, including Circle and Ripple in June. Furthermore, the country’s central bank has proposed new exchange rules to keep customer assets in a Statutory Trust.
This week, Thailand’s SEC also issued guidelines for crypto exchanges to display disclosure statements. However, in a step backward, it banned platforms from providing returns to customers who lend crypto assets.
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