On July 18, 2024, South Korea saw the implementation of its first-ever cryptocurrency regulatory framework, the Virtual Asset User Protection Act. This legislation is proactive following major global crypto-related financial setbacks in 2022, including the Terra-Luna and FTX collapse.
The law aims to establish a more secure trading environment for digital asset investors by introducing various risk mitigation strategies.
The Virtual Asset User Protection Act was passed one year before it took effect and followed a very elaborate redrafting process. It mandates virtual asset exchanges to store 80% of client deposits in cold wallets, which are not connected to the internet, enhancing security.
South Korea Regulatory Measures
The new framework also requires cryptocurrency service providers to isolate the funds of customers from the company’s funds. This is reinforced by the requirement that exchanges maintain crypto reserves equal to the amount and type of customer deposi
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