Korea passes first-of-its-kind crypto bill

New South Korean law aimed at defining what digital assets are and imposing penalties for violations and unfair trading practices. The new proposed law comes after the collapse of two major cryptocurrency tokens, which brought the need for more protective laws and tighter regulation.

Original story by Hooyeon Kim for Bloomberg

The Korean parliament has recently passed the Virtual Asset User Protection bill. The bill, which consolidates from 19 other proposed legislations on the matter of cryptocurrency, defines penalties for crypto-related violations, market manipulation, and other unfair trading practices.

The new law would require insurance coverage, reserve funds, and record keeping for users, on top of other protective measures. The law will also require crypto service providers to ring-fence crypto users’ assets and deposits.

The new legislation also empowers several financial institutions like the Financial Services Commission which will be the principal government department to oversee crypto operators. The Bank of Korea will also be tasked to probe crypto platforms.

Welcome development

For a country with a crypto market of about USD 38B monthly, the new law has been a welcome development, especially to industry stakeholders. 

The Korea Blockchain Enterprise Promotion Association has been calling for government regulation on crypto since as early as 2018. 

The association’s secretary general, Lee Suh Ryoung, hailed the passing of the bill, saying that it is ‘an attempt to build order.’ He added, however, that the bill was generally crafted in the context of traditional finance, according to the Bloomberg report. 

According to Statista, South Korea’s cryptocurrency industry reaches an upward of a daily trading volume of 12.57 trillion Korean Won, with Upbit as the leading platform (having 8.3 million registered users).

SoKor’s crypto scene was recently rocked by a series of scandals, like the murder of a woman from Gangnam, which was allegedly related to a dispute over cryptocurrency assets. Recently, too: the crash of prominent cryptocurrency platforms TerraUSD and Luna, with a collapse involving 40B US dollars. 

Forbes outlines a recent history of the crashes of South Korea’s crypto industry, including collapses of leading crypto platforms. According to the Forbes report, further losses are expected after FTX caved in last November.

The new legislation also includes penalties for price manipulation, false advertisement and disinformation of crypto assets and penalizing lack of cooperation with oversight and regulatory agencies. The law will come into effect next year.

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