Summary
South Korea’s Financial Services Commission (FSC) has proposed new rules to protect crypto users under the Protection of Virtual Asset Users Act, set to take effect in July 2024. The rules would include electronic tokens with economic value but exclude electronic bonds, mobile gift certificates, CBDC-linked deposit tokens, and non-fungible tokens (NFTs). However, NFTs could be categorized as virtual assets if issued on a large scale or used as a payment method. The proposal also suggests that Virtual Asset Service Providers (VASPs) must custody customer money in banks and use cold wallets for 80% of customers’ virtual assets. Liability insurance would also be required for VASPs. The comment period for the proposals is open until January 22. South Korea has been working to regulate the crypto industry and has previously ordered companies to disclose crypto holdings and issuances.
Key Points
1. South Korea’s Financial Services Commission (FSC) has proposed new rules to protect crypto users under its Protection of Virtual Asset Users Act, set to take effect on July 19, 2024. These rules will cover electronic tokens with economic value that can be traded or transferred electronically.
2. The proposed rules exclude certain tokens, such as electronic bonds, mobile gift certificates, deposit tokens linked to CBDC, and non-fungible tokens (NFTs). However, NFTs may still be categorized as a virtual asset if they are issued on a large scale, traded in a fungible manner, or used as a payment method for goods and services.
3. The proposal suggests that Virtual Asset Service Providers (VASPs) would custody customer money in banks and use cold wallets to hold approximately 80% of customers’ virtual assets. Banks would be allowed to invest the deposits in safe assets like government bonds. VASPs would also be required to have liability insurance, with the compensation limit set at least 5% of customer funds in hot wallets or reserves of the same amount set aside.