In a bid to safeguard crypto investors from unfair market practices and criminal activities, the South Korean government has announced stringent measures, including higher fines and penalties for violations.
Stricter Penalties for Crypto Criminals
Under the newly introduced regulations, individuals involved in crypto crimes could face imprisonment exceeding one year or fines ranging from three to five times the stolen amount. Those found guilty of illegal profits surpassing five billion won ($3.8 million) may even face life imprisonment or fines double the amount stolen.
Effective July 19, 2024, the measures are part of the Virtual Asset User Protection Act, which was passed into law on July 18, 2023. This legislation aims to protect the assets of crypto users and investors by imposing responsibilities on crypto business operators to safeguard users’ deposits.
South Korea Gives Protection Measures for User Deposits
Crypto businesses are now mandated to store at least 80% of users’ deposits in cold storage to mitigate the risks of hacks and system failures. Additionally, these firms must acquire insurance or establish a reserve fund with a specified compensation limit to prepare for potential exploits.
The new law prohibits crypto business operators from withholding information about crypto assets, participating in market manipulation, and engaging in illegal trading activities.
The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) are tasked with overseeing and inspecting digital asset businesses to ensure compliance with the Virtual Asset User Protection Act. These regulatory bodies have the authority to suspend operations, mandate corrections, lodge complaints, and alert investigative agencies and the prosecutor general about violations.
Building Infrastructure for Effective Supervision
To facilitate the enforcement of regulations, the South Korean government plans to establish an infrastructure for conducting supervision and investigative duties. This system will assist crypto business operators in fulfilling their obligations and ensure a seamless implementation process.
