South Korea Enacts First-Ever Crypto Asset Legislation Amid Surging Trading Activity

South Korea takes a stride towards legitimizing cryptocurrency with the recent enactment of the nation’s inaugural digital-asset legislation. The law, aimed at bolstering the safeguarding of investor interests, comes at a time when South Korean cryptocurrency exchanges are witnessing a surge in trading volumes.

A Long-Awaited Move Towards Crypto Regulations

The Virtual Asset User Protection law, a pioneering legislation in the realm of digital assets, consolidates 19 crypto-focused bills. The implementation of this legislation was subjected to an extended delay before finally being approved by Parliament. 

This new regulatory framework provides clear definitions for digital assets and enforces stringent penalties for various infractions such as insider trading, market manipulation, and deceptive trading practices.

Broadening Oversight of Cryptocurrency Activities

The legislation empowers the Financial Services Commission (FSC) with the authority to supervise both cryptocurrency operators and custodians. The Bank of Korea also gets a nod for scrutinizing such platforms. 

One of the highlights of the act is the inclusion of requirements such as insurance coverage, maintenance of reserve funds, and obligatory record keeping. Notably, cryptocurrencies like Bitcoin fall under the purview of these new regulations, whereas tokens considered securities will be governed by the existing capital markets law.

Navigating Past Challenges

The emergence of this law follows a year after the dramatic collapse of tokens engineered by South Korean Do Kwon, which catalyzed a staggering $2 trillion slump in the global cryptocurrency market. 

The sector was again thrust into turmoil when two digital-asset lenders associated with South Korea abruptly suspended withdrawals in June. Despite these events, South Korea persists as a major player in the global cryptocurrency arena.

Mixed Reception from the Crypto Community

While the new legislation is largely seen as a positive step, not everyone is on board. Lee Suh Ryoung, the head secretary-general of the Korea Blockchain Enterprise Promotion Association in Seoul, suggests that the new legislation might inadvertently stifle the industry’s growth rather than stimulate it. 

He argues that the law’s structure continues to perceive cryptocurrency from a traditional finance perspective. Nevertheless, the newly enacted law is a significant milestone in South Korea’s journey toward embracing cryptocurrency within its financial ecosystem.