South Korea’s crypto law will proceed as a two-part legislation, allowing regulators to make necessary amendments in a subsequent regulation.
- Crypto.com delayed its South Korea launch due to new regulations; OKX is being investigated for unregistered promotions.
- The Korean won was the most-traded currency for crypto in Q1 2024, surpassing the US dollar and euro.
- New crypto laws may boost global blockchain expansion, but clearer guidelines are needed for asset issuance, per a Korean think tank leader.
South Korea has officially enacted its first comprehensive crypto law, fast-tracked in response to the Terra-Luna and FTX collapses in 2022. The Virtual Asset User Protection Act was approved on July 18, 2024, with a one-year grace period for refining regulatory details.
The Virtual Asset User Protection Act, effective July 19, mandates registered crypto exchanges to review over 600 virtual asset listings for regulatory compliance. Severe penalties are imposed for specific offenses, with illicit gains exceeding 5 billion Korean Won (approximately $3.6 million), potentially resulting in lifetime imprisonment.
The law introduces three key measures:
- Maintaining 15-year transaction records for verification and tracking.
- Separating customer funds from operational assets.
- Storing at least 80% of customer assets in cold wallets to prevent hacking.
Only 30% of Failed Korean Exchanges Actually Return Customer Funds
Effect of South Korea’s New Law
Large crypto exchanges, such as Crypto.com, have indefinitely postponed their launch in South Korea due to new regulations introduced in April, according to The Block. Additionally, OKX, as reported by local sources, faced a potential investigation for allegedly promoting its Jumpstart program locally without proper registration.
South Korea remains a dominant player in the crypto market, with the Korean won being the most-traded currency for cryptocurrencies in Q1 2024. According to Kaiko, this surpasses the trading volume of the US dollar and significantly outpaces the euro and other currencies.
Kim Hyoung-joong of the Korea Fintech Society told The Block that the new law could allow local blockchain solutions to expand globally. However, he emphasized the need to extend the framework, particularly noting the lack of regulation for the issuance of virtual assets.
The think tank leader highlighted that regulators are missing opportunities to foster the local crypto industry while enforcing strong regulations. Concurrently, South Korea’s virtual asset law, initially conceived as a two-part legislation, is under review, with lawmakers deliberating on additions for the follow-up regulation.
Areas under review include regulating token issuers, lifting the ban on institutional crypto investment, and establishing stablecoin regulations. Although the future of South Korea’s crypto regulation remains uncertain, Kim emphasizes the need for comprehensive and clear guidelines to support the industry’s growth and integrity.
