In a move to safeguard cryptocurrency investors from potential collapses similar to Do Kwon’s Terra ecosystem tokens, the South Korean government has taken proactive measures by enacting a new crypto bill.
On June 30, the South Korean parliament successfully passed the Virtual Asset User Protection legislation, aiming to establish regulations against unfair trade practices and ensure the protection of crypto investors, as reported by local news agency SBS Biz.
The newly proposed legislation combines 19 distinct bills pertaining to cryptocurrencies. It offers a comprehensive framework that defines digital assets and establishes strict penalties for unlawful activities such as insider trading, market manipulation, and unfair practices in the crypto market.
As per reports from local media, the primary focus of the Virtual Asset User Protection Act is to prioritize the application of the Capital Market Act to virtual assets that exhibit characteristics similar to securities. In addition, the legislation aims to create a framework for imposing penalties and establishing liability for any damages resulting from unfair cryptocurrency trading practices.
To safeguard investors, virtual asset service providers (VASPs) in South Korea are now mandated to take on the responsibility of users’ deposits and offer insurance coverage. These essential measures are put in place to ensure user protection against potential risks such as hacks, computer failures, and other unforeseen events.
As outlined in the report by SBS Biz, the violation of the newly established regulation could lead to fixed-term imprisonment of at least one year or substantial fines. Notably, the Financial Services Commission holds the authority to impose penalties amounting to twice the gained profits.
This development comes shortly after Do Kwon, the founder of Terraform Labs, was sentenced to four months in prison by a court in Montenegro for the use of a Fraudulent passport.
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