South Korea has given the green light to landmark legislation dedicated to digital assets, aiming to reinforce protection for investors.
This comes in the wake of the dramatic collapse of cryptocurrencies developed by South Korean Do Kwon, which played a role in a global $2 trillion cryptocurrency market downturn just over a year ago.
The South Korean Parliament on Friday enacted the Virtual Asset User Protection Act, an amalgamation of 19 bills related to cryptocurrencies that had been long pending, Bloomberg reported.
The newly passed law lays down a framework for what constitutes digital assets and prescribes punitive measures for offenses such as insider trading, market manipulation, and other unfair trade practices.
The Financial Services Commission (FSC) is vested with the authority to supervise entities dealing in cryptocurrencies and those managing these digital assets under this legislation.
The law also empowers the Bank of Korea to conduct investigations into cryptocurrency platforms. Moreover, the legislation mandates insurance policies, the establishment of reserve funds, and the maintenance of relevant records.
It is applicable to digital currencies like Bitcoin BTC/USD, and Ether ETH/USD while the existing securities laws will continue to govern tokens that are considered securities.
Kwon was recently handed a four-month prison sentence in Montenegro for attempting to travel on a fake passport.
Both South Korea and the United States have issued warrants for his arrest following the 2022 crash of his cryptocurrencies, TerraUSD UST/USD and Luna LUNA/USD coins, which resulted in the obliteration of at least $40 billion in market value.
Furthermore, the need for regulation became apparent not just due to Kwon’s case, but also as investors faced additional jolts in the volatile digital asset market. Two cryptocurrency lending platforms associated with South Korea suspended withdrawals abruptly in June. Additionally, a notorious murder case in Seoul linked to cryptocurrency investment losses in March added to the urgency for lawmakers to expedite the formulation of new regulations.
Globally, there has been a surge in regulatory initiatives concerning digital assets. Hong Kong and Dubai are making efforts to become appealing destinations for cryptocurrency investments. The European Union has also recently adopted its significant Markets in Cryptoassets (MiCA) regulation.
In the United States, regulatory bodies have taken stringent measures in response to a series of incidents, which include the bankruptcy of the FTX exchange.
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