According to PANews, South Korea's first comprehensive cryptocurrency regulatory framework has come into full effect, focusing on investor protection. The new law, known as the Virtual Asset User Protection Act, was officially approved on July 18, 2024, and includes a one-year grace period to finalize regulatory details. This legislation imposes stricter requirements on digital asset exchanges, mandating that South Korean crypto exchanges store at least 80% of user deposits in cold wallets to separate user funds from the exchange's own assets. Additionally, exchanges must entrust user cash deposits to local licensed banks and maintain cryptocurrency reserves equivalent to the quantity and type of customer deposits. Furthermore, South Korean crypto services are now required to purchase adequate insurance or establish reserve funds to address potential hacking incidents or liquidity crises. Besides measures to protect user funds, the law also mandates exchanges to implement real-time monitoring systems to report suspicious transactions that may be illegal. Companies failing to comply with the new regulations may face penalties from the Financial Services Commission (FSC) or have their services suspended.
