The Virtual Asset User Protection Act is set to be implemented in South Korea on July 19, 2024, bringing about significant changes in the virtual asset ecosystem. This act, designed to shield users from fraud and enhance security, introduces a framework for the regulation of virtual assets. The act defines virtual assets as electronic tokens with economic value that can be traded or transferred on electronic exchanges. It outlines the classification of virtual assets and specifies that non-fungible tokens (NFTs) meeting specific criteria will fall under the virtual asset category.
Financial institutions approved as custodians of VASP customer funds will need to segregate VASPs' funds from clients' funds. Storage requirements mandate that a substantial portion of customers' virtual assets be held in cold wallets, with the storage amount determined monthly based on asset values.
Criteria for insurance deductibles and reserves are established to ensure VASPs can cover liabilities in the event of incidents like hacking. VASPs are required to procure liability insurance proportional to customers' virtual assets stored in hot wallets.
Regulations concerning material non-public information and prohibitions on arbitrary blocking of transactions without valid justification are key aspects of the act. Monitoring abnormal transactions on VASPs is emphasized, with penalties for unfair trading practices aimed at maintaining market integrity. The act strives to enhance transparency and security in the virtual asset market, setting new standards for accountability and regulation. It is essential to consider individual circumstances and risks before engaging in crypto asset activities.
