The South Korean government is taking extra steps to ensure the protection of crypto investors from unfair market activities and criminals by imposing higher fines and punishments for violations of certain provisions.
According to a press release, crypto criminals face jail terms of more than a year or a fine equal to three to five times the stolen amount. Depending on the weight of the offense, individuals who make illegal profits of more than five billion won ($3.8 million) may be sentenced to life imprisonment or be imposed a fine equivalent to twice the stolen amount.
Crypto Criminals Face Life Imprisonment
The new measures are part of the Virtual Asset User Protection Act, which is expected to be effective on July 19, 2024. The government enacted the law on July 18, 2023.
The new law protects the assets of crypto users and investors, tasking crypto business operators with the burden of protecting users’ deposits. These deposits are to be managed by institutions with public trust, like banks, due to their regulatory compliance, stability, and specific management systems.
Crypto businesses must keep at least 80% of users’ deposits in cold storage to lessen the impact of hacks and computer failures. Such firms must also prepare for exploits by signing up for insurance or accumulating a reserve fund with a stipulated compensation limit.
Business operators are prohibited from holding back information regarding crypto assets, engaging in market manipulation, and illegal trading activities.
FSC and FSS Tasked With Supervision
Furthermore, the new law tasks the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) with supervising and inspecting digital asset businesses to investigate and take action on violations.
“The Financial Services Commission can supervise whether virtual asset business operators appropriately comply with the Virtual Asset User Protection Act and inspect their business and property status. In accordance with the authority delegation provisions of the Enforcement Decree (draft), inspection work will be carried out by the Financial Supervisory Service,” the statement read.
The FSC and FSS can enforce measures like suspending operations, ordering corrections, filing complaints, and notifying investigative agencies and the prosecutor general about crypto businesses violating the Protection Act.
To ensure a smooth implementation of this process, the South Korean government intends to build an infrastructure for executing supervision and investigative duties. The system will also help crypto business operators prepare and carry out their obligations
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