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The Financial Services Commission of South Korea implemented strict new crypto exchange laws on July 19, aimed at protecting customer assets and ensuring security.
Enhanced Customer Protection Measures
On July 19, the much-anticipated new rules put out by South Korea's financial security agency became live, safeguarding customers when they transact with virtual asset service providers (VASPs) for the purchase and storage of crypto assets.
According to a statement from the Financial Services Commission (FSC) of South Korea dated July 17, titled the "Virtual Asset User Protection Act," VASPs are required to take several measures to safeguard user cryptocurrency.
Customer funds must be "safely kept in banks," the exchange must take precautions to prevent hacking and other malicious attacks on user crypto assets, and the customer's crypto assets must remain distinct from the exchange's assets.
Additionally, VASPs must report any questionable transactions to the regulator and keep up a specific degree of due diligence to avoid money laundering on their platforms, per Cointelegraph.
Surveillance and Reporting Obligations
"VASPs should maintain a surveillance system for suspicious transactions at all times and immediately report suspicious trading activities to the Financial Supervisory Service (FSS)," according to the statement.
"After going through investigations by the financial and investigative authorities, those who are found to have engaged in unfair trading activities may be subject to criminal punishment or penalty surcharge," it added.
Crypto Exchange Compliance and Delisting Concerns
South Korean cryptocurrency exchanges have lately expressed worry that the regulations may force them to delist a large number of tokens all at once.
"The possibility of mass delisting occurring all at once is unlikely," according to the Digital Asset Exchange Alliance (DAXA), as reported by Cointelegraph on July 3, there will be a total of 1,333 cryptocurrencies reviewed over the next six months by a group of 20 South Korean crypto exchanges as part of the new crypto user protection laws.
At the same time, the People's Power Party, which is in power in South Korea, has formally suggested postponing the introduction of the country's tax on earnings made from cryptocurrency trading.
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