Korean crypto exchanges could face harsh laws if new proposal is passed
South Korea's policymakers have introduced a new bill aimed at protecting crypto users against unfair practices.
The ruling party of South Korea has proposed a new bill that aims to limit crypto-related companies’ ability to trade digital assets and increase their liability in case of a hack, local news outlet Naver reported today.
The enactment, dubbed “Virtual Assets Act” and presented by the Democratic Party lawmaker Lee Yong-woo, will prohibit crypto firms from engaging in “unfair practices” such as trading (including the so-called “wash trading”), buying, and selling of digital assets if this can affect their prices. Essentially, companies won’t be able to act as market makers to curb risks of price manipulation.
The upcoming regulation in Korea proposed by the ruling party will be a big burden on crypto companies based in Korea.
It bans trading that changes price aka market making. It also requires KYC, insurance, and hacking prevention for all and have to reimburse in a case of hack
— Doo (@DooWanNam) May 6, 2021
For failing to comply with these trading restrictions, Koreans will be facing one or more years in prison or a hefty fine up to fivefold the amount of profit or loss that resulted from such violations.
Additionally, the bill implies that operators of crypto exchanges and other digital assets-related companies will be obligated to take sufficient measures to prevent any potential hacker attacks. If a hack results in damages which the firm didn’t do enough to prevent, it will be deemed liable.
“The number of virtual asset investment fraud and hacking accidents is increasing rapidly, but there are no regulations related to this in the current law, so we intend to provide an institutional mechanism to protect users of virtual assets,” Lee added.
More KYC and AML requirements
The enactment will also make it illegal to sell or broker cryptocurrencies via door-to-door, telephone solicitation, and multi-level sales. Violation of this will result in up to five years of jail time or up to 50 million won (roughly $45,000) in fines.
Finally, the bill aims to strengthen know-your-customer and anti-money laundering requirements for crypto companies and obliges them to store customers’ cryptocurrencies separately from the firm’s proprietary property (or sign an insurance contract for funds in their custody).
As CryptoSlate reported, South Korea’s policymakers have come up with a slew of regulatory proposals aimed at cryptocurrencies. For example, the government plans to introduce a capital gains tax on profit that resulted from crypto trading next year.
However, a recent survey showed that 54% of Koreans actually support such a tax.