South Korea Launches New Virtual Asset Protection Law

South Korea's Financial Services Commission (FSC) has rolled out a new law aimed at bolstering the protection of virtual asset users, effective from July 19.

This law, the Virtual Asset User Protection Act, builds on previous regulations from March 2021, which required virtual asset service providers (VASPs) to register with financial authorities and adhere to anti-money laundering standards.

The new act, passed on July 18 last year, strengthens oversight of VASPs by addressing issues such as asset safety and unfair trading practices.

Key provisions include mandatory segregation of user funds, insurance or reserve funds to mitigate risks like hacking, and strict monitoring of transactions to identify and report suspicious activities.

VASPs are now required to store customer deposits at banks and pay interest on these funds. They must also keep detailed records of user assets and are subject to more rigorous inspections and penalties for non-compliance.

The FSC aims to create a more secure environment for virtual asset users with these enhanced regulations.

However, they emphasize that while the new rules offer increased protection, risks remain, particularly with transactions involving unregistered service providers or peer-to-peer exchanges