South
Korea’s financial regulator is ramping up oversight of the virtual asset
market, warning of severe consequences for illegal transactions just two months
after implementing new protective legislation. Cryptocurrency scammers can now spend life sentences behind bars if their illegal operations exceed $4 million.
South Korea Tightens Grip
on Virtual Assets
Financial
Supervisory Service (FSS) Chief Lee Bok-hyun met with executives from 16
virtual asset operators today (Thursday), emphasizing
the government’s commitment to enforcing the Virtual Asset Users Protection
Act, which took effect on July 19.
“The
financial government will continue to successfully implement the virtual asset
users act by carrying out its oversight,” Bok-hyun commented, quoted by the
Yonhap News Agency. The FSS will also “take stern punitive measures under the
principle of zero-tolerance by focusing all its investigative resources when
suspicions of illegal transactions are detected.”
The FSS
plans to closely monitor market volatility and the spread of unverified
information, particularly regarding newly listed coins. Lee urged
cryptocurrency exchanges to enhance their monitoring systems and maintain open
communication with supervisory authorities.
The FSS has
already announced plans to inspect two cryptocurrency exchanges where
“unusual cases” were detected, with regular inspections scheduled for
three additional exchanges and a wallet provider.
Lee hinted
at potential future regulatory adjustments. The FSS wants to continue to
consult closely with businesses and related agencies to set the direction of “second-phase”
revisions.
The Virtual Asset User Protection Act was triggered by a significant disruption in the industry caused by Terraform Labs and its founder, Do Kwon, from South Korea. Terra’s failure in May 2022, leading to market losses of over $450 billion, led legislators to address regulatory deficiencies and enhance investor protections quickly.
Crypto Criminals Face
Potential Life Sentences
Under
regulations introduced over two months ago, cryptocurrency criminals in South
Korea can now face life imprisonment if the value of their illegal transactions
exceeds 5 billion won, or nearly $4 million.
The new
regulations require cryptocurrency exchanges to establish robust monitoring
mechanisms to detect and report suspicious activities to financial authorities.
Specifically, the law prohibits the use of insider information, market price
manipulation, and unfair trading practices.
Industry
experts emphasize the importance of an “order book information loading
system” as a key component of the new monitoring requirements. The law
mandates exchanges to maintain detailed trading records, including order book
information at the time an order is placed, which is crucial for authorities to
determine instances of unfair trading.
Work on the
new regulations lasted for many months. In March 2023, the South Korean
National Assembly passed a law establishing a legal framework for regulating
digital assets. Subsequently, in February 2024, the Financial Supervisory
Service (FSS) officially enacted new laws.
This article was written by Damian Chmiel at www.financemagnates.com.
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