The South Korean government is taking steps to protect cryptocurrency investors from the likes of Do Kwon’s Terra ecosystem tokens implosion by passing new crypto legislation.
On June 30, the South Korean parliament passed the Virtual Asset User Protection Act, which is designed to regulate unfair trading practices and protect crypto investors, according to SBS Biz. The legislation integrates 19 different crypto-related bills, providing a unified definition of digital assets and imposing penalties for illicit trading activities such as using undisclosed information, market manipulation, and other unfair trading practices in the crypto world.
The main point of the Virtual Asset User Protection Act is to apply the Capital Market Act to virtual assets of a securities nature. The legislation also aims to establish a basis for imposing penalties and liability for damages caused by unfair crypto trading.
To protect users, virtual asset service providers (VASPs) in South Korea are now required to take responsibility of users’ deposits and provide insurance. This is necessary to ensure user protection against hacks, computer failure, and other risks. Breaching the new rules can result in a fixed-term imprisonment of not less than one year or major fines. The Financial Services Commission can impose a penalty equivalent to twice the amount of profits gained from unfair trade.
The news of the new legislation comes shortly after Terraform Labs founder Do Kwon was convicted by a court in Montenegro of using a false passport and facing an arrest warrant in South Korea for alleged capital markets law violations. Prosecutors in South Korea recently described Terra’s token collapse as the biggest financial fraud or financial securities fraud case in the country.
