South Korea has implemented its much talked-about “Virtual Asset User Protection Act” that defines the dos and don'ts for crypto firms, that wish to offer their services in the nation. This legal framework is aimed at controlling and eventually curbing the exploit of crypto assets for illicit activities like money laundering and terror financing. The South Korean government appears to have mirrored the laws implemented by other regions including India and the EU, but has also listed some new preventative measures focused on the crypto sector.
What is New in South Korea's Crypto Laws
Seoul, as part of this fresh legislation, has directed all virtual asset service providers (VASPs) to protect user deposits by keeping them in banks and paying interest payments to the depositors. In light of rising hack attacks on crypto exchanges and instances of funds mismanagement, Seoul has mandated VASPs to keep their company funds completely separate from user funds.
The authorities of the Asian nation has divided the oversight on crypto between two bodies – the Financial Supervisory Service (FSS) and the Financial Services Commission (FSC).
While the FSS will be responsible for ensuring that all the VASPs are complying with the laws laid down for crypto companies, the FSC has been tasked to tackle rule-breakers, take corrective decisions, and imposing administrative decisions.
India still does not have any specific government entity for overseeing the crypto sector. Usually, the finance ministry and the RBI work together around crypto-related policy work and decisions, but neither is officially responsible for the crypto sector.
Which Laws are Similar
South Korea has made it compulsory for crypto-related firms to register with its financial regulators. In India as well, all crypto firms have to register with the Financial Intelligence Unit (FIU).
Crypto exchanges have also been asked to identify and report suspicious transactions to the financial authorities to timely mitigate any financial risks. These laws are also common with European Union's MiCA laws.
Much like India, South Korea is focusing on ensuring that the crypto tokens listed on exchanges in the nation are safe and secure. Seoul has been getting exchanges to review all the crypto tokens to see if they are all legitimate and compliant. In India, the crypto industry has been deploying self-regulatory laws around assessment of crypto tokens a regular time of intervals.
“The financial authorities plan to continue to seek stronger cooperation with investigative authorities and actively seek improvements to make sure that the new law is effectively implemented. The guidelines suggest the minimum level of compliance standards required for all virtual asset exchange service providers and recommend that VASPs provide essential information to their users,” the release from South Korea's FSC noted.
