South Korea Passes Landmark Crypto Bill Tackling Crypto Scandals 

  • South Korea passes its first standalone digital-asset bill.
  • The bill aims to safeguard investors and address crypto scandals.
  • The legislation defines digital assets and imposes penalties for violations.

South Korea has made a significant move in the crypto world by passing its first standalone digital-asset bill to safeguard investors and address the aftermath of a series of scandals. The bill was approved by Parliament on Friday, consolidating 19 crypto-related bills into one comprehensive legislation.

According to the Bloomberg report, the Virtual Asset User Protection legislation defines digital assets and establishes penalties for violations, including using nonpublic information, market manipulation, and unfair trading practices. 

It grants the Financial Services Commission the authority to supervise crypto operators and asset custodians while enabling the Bank of Korea to investigate such platforms. The legislation also mandates insurance coverage, reserve funds, and proper record-keeping. 

Notably, Bitcoin and similar assets fall under these new rules, while tokens categorized as securities will continue to be governed by existing capital-markets law.

Furthermore, the passing of this bill comes in the wake of the notorious collapse of tokens created by South Korean entrepreneur Do Kwon, which contributed to a massive $2 trillion crypto-market downturn. 

Kwon, now wanted by South Korean authorities, was recently sentenced to four months in jail in Montenegro for attempting to travel with a forged passport. His TerraUSD and Luna coins disintegrated in May 2022, resulting in losses of at least $40 billion.

Notably, the fallout surrounding the Terra Luna ecosystem also gave rise to the collapse of crypto firms such as Celsius and Voyager.

Acknowledging the significance of the new legislation, Lee Suh Ryoung, the chief secretary general of the Korea Blockchain Enterprise Promotion Association, expressed approval while noting that the law remains entrenched in the traditional finance perspective. Ryoung cautioned that this approach could hinder the crypto industry’s growth instead of fostering it.

Back Hyeryun, the chair of the National Policy Committee at the South Korean parliament, assured that the focus of the new rulebook is initially on investor protection and will gradually expand to encompass broader oversight.

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