South Korea's first cryptocurrency regulatory framework is fully in effect, focusing on investor protection

ChainCatcher news, according to The Block, South Korea's first cryptocurrency regulatory framework has now come into full effect, focusing on investor protection. The new law, the "Virtual Asset User Protection Act," was officially approved on July 18, 2024, and provides a one-year grace period to refine regulatory details.

The legislation imposes stricter requirements on digital asset exchanges, with South Korean crypto exchanges now required to store at least 80% of user deposits in cold wallets, thereby isolating user deposits from the exchange's own funds. Exchanges must also entrust user cash deposits to local licensed banks for safekeeping and hold cryptocurrency reserves equivalent to the quantity and type of customer deposits. Additionally, South Korean crypto services are now required to purchase sufficient insurance or establish reserve funds to address hacking incidents or liquidity crises.

In addition to measures to protect user funds, the law also requires exchanges to establish real-time monitoring systems to report potentially illegal abnormal trading activities. Companies that fail to comply with the new regulations may face penalties from the Financial Services Commission (FSC) of South Korea or have their services suspended.