South Korea’s new cryptocurrency law, the Virtual Asset User Protection Act (VAUPA), came into effect on July 19, following the Financial Services Commission’s emphasis on the necessity for virtual asset providers to safeguard customer funds and adhere to national regulations.
The Virtual Asset User Protection Act, effective from July 18, 2023, granted financial institutions a grace period to implement compliance measures. By the end of last week, the law was fully operational. VAUPA focuses on protecting user assets, regulating unfair trading activities, and empowering financial regulators to investigate institutions dealing with virtual assets.
The South Korean government mandates that customer deposits in banks be secured and appropriate fees charged, with suspicious transactions reported immediately. The Financial Services Commission (FSC) believes that the implementation of VAUPA will create a foundation for robust user protection, enabling strict penalties for unfair trading practices and fostering sound order in the virtual asset market, according to an FSC press release.
However, the South Korean regulator cautioned that the law does not guarantee the safety of users’ virtual assets, advising users to exercise caution when managing their monetary assets.
South Korea boasts a thriving crypto market and a strong investor community. International traders also leverage Korean crypto exchanges to benefit from temporarily higher asset prices compared to other regions, a phenomenon known as the “kimchi premium.”
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