South Korean cryptocurrency investors should expect tighter protections next month after the government approved new legislation to protect users in the case of a crypto exchange bankruptcy.
The Financial Services Commission (FSC) declared on Tuesday that the enforcement decree, scheduled to go into effect on July 19, is a component of a larger plan to control the nation’s market for digital assets.Â
Per the decree, Virtual Asset Service Providers (VASPs) must ensure that their operating funds are stored at respectable financial institutions and separate consumer deposits from them.
By implementing this strategy, South Korea hopes to lower the risks of hypothetical exchange insolvencies and increase user confidence in the Korean Bitcoin sector.
In order to provide additional protection, VASPs must hold at least 80% of users’ digital assets in cold storage, which are offline systems with higher security against losses and attacks.
Regulators may enforce an even greater need for cold storage to reduce the danger of fraudulent activities or operational shutdown, depending on the security outlook of a VASP.Â
The regulation increases user safety and imposes severe sanctions on manipulative and fraudulent activities in the cryptocurrency sector. Exploiters of the system risk a minimum sentence of one year in prison or fines equal to five times the illicit income made from their operations.
The order also allows VASPs to limit user deposits and withdrawals under specific circumstances to provide further control over erratic behavior. South Korea has started taking more legal action lately to stop con artists from defrauding cryptocurrency investors of their money.
Nineteen members of a fraudulent social media chat group that had tricked over 300 investors out of around $19 million were taken into custody by South Korean authorities on May 21.
Although official taxation on cryptocurrency revenues has yet to be established in South Korea, uncertainty has been caused by continued indecision regarding establishing such charges.
However, because there are worries that people are using cryptocurrencies to avoid paying taxes, tax officials are closely monitoring the situation. A South Korean province was credited with recovering $4.6 million in cryptocurrency in a year from 2,300 alleged tax evaders, according to a post published on February 22.
