New South Korea Rule Ensures Customer Refunds in Crypto Exchange Bankruptcies
Crypto investors in South Korea will have more peace of mind starting next month, thanks to new rules that protect users’ balances in case of a crypto exchange bankruptcy.
The Financial Services Commission (FSC) on Tuesday announced that the government approved an enforcement decree aiming to boost confidence in the country’s digital asset market.
The recently passed virtual asset proposals offer more than just safety nets for user balances during exchange failures. They represent a wider effort to regulate the crypto space in South Korea. Effective July 19, these measures will clearly define and categorize virtual assets. They will also establish mechanisms to tackle unfair trading practices.
[Press Release] The Financial Services Commission announced that the government approved a new legislative bill on the Enforcement Decree of the Act on the Protection of Virtual Asset Users at a cabinet meeting held on June 25. https://t.co/gwFozngToP
— Financial Services Commission – FSC Korea (@FSC_Korea) June 25, 2024
Under the decree, VASPs (Virtual Asset Service Providers) will be required to hold customer deposits at reputable financial institutions, separate from their own company funds. This move aims to minimize risks associated with exchange insolvency and enhance user trust in the Korean crypto market.
If a VASP faces bankruptcy or closure, the custodian bank will step in. It will have to directly return user deposits to customers after publicly announcing the process through newspapers and websites.
VASPs will now be required to store at least 80% of their users’ digital assets in cold storage. Cold storage refers to offline, high-security systems that minimize the risk of hacking or loss.
Additionally, the authorities can
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