South Korea has taken a firm stance in safeguarding cryptocurrency investors’ interests with the introduction of the Virtual Asset Users Protection Act, announced by the Financial Services Commission (FSC) on Wednesday.
Set to come into effect on July 19, 2024, this legislation signifies a pivotal move towards regulating the country’s cryptocurrency market.
Its primary objectives include combating market crimes and enhancing transparency by prohibiting the utilization of undisclosed significant information in cryptocurrency transactions, as well as activities associated with market manipulation and illegal trading.
Violators of the Virtual Asset Users Protection Act will face severe penalties, including fixed-term imprisonment exceeding one year or fines ranging from three to five times the amount of illegal profit.
Individuals who accrue over $3.8 million from illicit cryptocurrency trading schemes may even face life sentences.
The FSC also asserts its authority to supervise and inspect virtual asset business operators to ensure compliance with the new law, enabling investigations and enforcement measures against unfair trading practices.
The impetus behind the Virtual Asset Users Protection Act stemmed from the collapse of Terraform Labs, led by South Korean national Do Kwon.
Following the company’s downfall in May 2022, which resulted in a market loss exceeding $450 billion, South Korean legislators swiftly moved to address regulatory deficiencies and bolster investor protections.
Kwon, facing extradition to the United States, confronts numerous charges, including commodities fraud, securities fraud, wire fraud, and conspiracy to defraud and engage in market manipulation.
Previously, the FSC had unveiled draft regulations mandating that companies involved in cryptocurrency holding or trading disclose transaction details to the financial regulator.
These regulations outlined the necessity for companies to provide information regarding the volume and characteristics of digital assets held, alongside details about their business operations and profits generated from cryptocurrency activities.
Such measures are pivotal in ensuring transparency and accountability within the cryptocurrency sector, bolstering investor confidence and mitigating risks associated with illicit activities.