South Korea Tightens Grip on Crypto With Stricter Regulations and Penalties

According to sources, South Korea is intensifying its oversight of the cryptocurrency market, with new regulations and penalties poised to effect on July 19, 2024. 

The country’s financial regulators are bolstering efforts to ensure investor protection and enhance transparency within the rapidly evolving digital asset landscape.

The forthcoming regulations, encompassing the Virtual Asset User Protection Act and the Virtual Asset Industry Supervision Regulations, signal a significant shift in South Korea’s approach to cryptocurrency regulation. 

These regulations, scheduled for implementation on July 19, introduce stricter guidelines and harsh penalties for various crypto-related offences.

New Regulations Bring Severe Consequences for Crypto Offenses

Under the Virtual Asset User Protection Act, actions such as market manipulation, insider trading, and illegal transactions will carry criminal liabilities, with penalties ranging from imprisonment to substantial fines. 

Offenders could face imprisonment for at least one year and fines of three to five times the value of the illegal profits. 

The Financial Services Commission (FSC) will oversee the enforcement of these penalties, which will play a pivotal role in investigating suspected violations and imposing sanctions accordingly. 

The FSC has been empowered to take decisive measures against virtual asset operators found in breach of the law, including business suspension, corrective orders, and filing complaints with investigative authorities.

Furthermore, the regulations mandate that cryptocurrency firms manage assets deposited for trading through banks to ensure wider regulatory compliance. 

Exchanges and related firms must store 80% of user assets offline to mitigate the risk of hacks, a measure to enhance the security of investors’ funds.

“If a violation of the law is discovered, the Financial Services Commission may take measures such as suspending business, ordering correction, filing a complaint, or notifying the investigative agency against the virtual asset business operator.” 

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You Could Face Life in Prison Under South Korea’s New Crypto Regulation

The new act brings penalties that could lead to lifetime imprisonment for individuals involved in illicit crypto gains exceeding $3.7 million and fines exceeding the illegal gains.

This stringent measure shows South Korea’s commitment to combatting financial crimes and ensuring the integrity of its cryptocurrency market.

The Virtual Asset User Protection Act also mandates stringent measures to safeguard user assets and enhance market integrity. 

Crypto exchanges will be required to secure users’ deposits and assets, with a significant portion mandated to be stored offline to mitigate the risk of hacking or operational failures. 

Additionally, exchanges must maintain insurance or reserve funds to cover potential losses, providing greater protection for investors in adverse events.

South Korea’s proactive regulatory approach reflects a broader trend of global regulatory tightening in cryptocurrency, especially since they have been known for constant regulation change and it is becoming a lot stricter.

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