South Korea Pushes Crypto Bill to Address Unfair Trading

Updated: 30 June 2023

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South Korea has approved its first independent legislation for digital assets to bolster investor protection against unfair trading in the crypto market.

This development comes about a year after the collapse of Terra tokens created by Do Kwon, which contributed to a $2 trillion decline in the nascent industry.

South Korea’s National Assembly Passes New Crypto Law

The South Korean National Assembly has passed the Virtual Asset User Protection Act, legislation aimed at enhancing the protection of users in the digital asset space.

The primary goal of this legislation is to apply the Capital Market Act to virtual assets characterized by securities attributes.

JUST IN – South Korea passes cryptocurrency bill to tackle unfair trading.

Bill aims to establish a basis for imposing penalties and liability for damages caused by unfair cryptocurrency trading.

— Metaverse (@shibabosss) June 30, 2023

It seeks to establish a robust framework for enforcing penalties and ensuring accountability in unfair trading involving virtual assets.

To safeguard user assets, operators of virtual assets are required to implement specific measures.

These measures include depositing and safeguarding customer funds, enrolling in insurance and mutual aid programs to mitigate risks like hacking and system failures, and maintaining records of virtual asset transactions.

Under the legislation, the Financial Services Commission is granted authority to oversee cryptocurrency operators and asset custodians, while the Bank of Korea is empowered to investigate such platforms.

South Korea's National Assembly Passes New Crypto Law — Source: The Korea Times

The act also mandates provisions for insurance coverage, reserve funds, and maintaining an accurate record.

The regulations apply to assets such as Bitcoin, while existing laws on capital markets cover tokens classified as securities.

Additionally, engaging in undisclosed utilization of important information, market price manipulation, and illicit transactions are classified as unfair trade practices under the act.

Violations of this regulation can result in penalties, including a minimum imprisonment period of one year or a monetary fine ranging from 3 to 5 times the amount of gains.

Law Passes After Scandals

This recent development came shortly after Do Kwon, the founder of Terraform Labs, was sentenced to four months in prison by a Montenegro court for using a fake passport.

In addition, Kwon is also facing an arrest warrant in South Korea for allegedly violating the country’s capital markets law.

Terra Co-Founder Do Kwon Faces Arrest Warrant in South Korea#DoKwon #Terra #terraluna #Lunc pic.twitter.com/HkDsvg7x44

— Crypto | Web3 | Ai (@nftpremier_) September 14, 2022

South Korean prosecutors recently claimed that the collapse of Terra’s tokens constitutes the largest case of financial fraud or securities fraud ever recorded in the country.