 |
| gettyimagesbank |
By Lee Min-hyung
Korea has taken its first step toward institutionalizing crypto assets, after a committee at the National Assembly approved an act focusing on the protection of crypto investors.
The move came about a year after the shocking collapse of the Terra-Luna ecosystem in May 2022, which was developed by disgraced Korean entrepreneur Do Kwon who is now detained in Montenegro.
Korean legal and financial authorities have spent the following year gathering efforts to introduce regulations around cryptocurrencies and digital assets, in a bid to prevent occurrences similar to the Luna debacle. But no concrete consensus had been reached over the institutionalization of cryptocurrencies.
Under the Virtual Asset Act ― which was passed on April 25 ― terms referring to cryptocurrency, digital assets and tokens were covered by the umbrella term virtual assets. The act also defined virtual assets as digital tokens that have economic value and can be electronically traded and transferred.
But the act excluded central bank digital currency (CBDC) from the definition, as a CBDC is a form of legal tender, while most cryptocurrencies are not. The decision came as part of a measure against possible market confusion in the future when cryptocurrencies become a more viable payment method in people's daily lives.
The act also included regulatory details such as countermeasures against illegal and unfair trading and the scope of supervision granted to authorities.
The Assembly classified the misuse of undisclosed information, price manipulation and unfair trading behaviors as "unfair trading acts." Those who engage in the practices will face criminal punishment and could be held accountable for investors' losses.
To enhance the protection of investors, cryptocurrency business operators are obligated to create and keep all crypto transaction records. Also, insurance against possible cyberattack or network failure will be mandatory.
Korea's movement to regulate the industry stands in line with global trends. The European Union recently passed the Market in Crypto Act (MiCA) to heighten vigilance against crypto fraud.
The arrest of the crypto fugitive last month sounded the alarm to global financial authorities over the dire need for regulatory measures against the possible recurrence of such incidents. The Luna collapse made global headlines throughout last year, as more than 280,000 investors fell victim to the scandal. Their combined losses are estimated to reach over 51 trillion won ($38 billion).
The act is the first step focusing on investor protection, and more is expected to come regarding the issuance of virtual assets and regulatory filing.
Experts stress that global standards should be considered in regulations. "If regulation is too much compared with global standards in certain region, global players would have no reason to operate there," Koo Tae-eon, an attorney of law firm Lin, said during a forum on digital innovation last Friday.
![[INTERVIEW] 'One Day Off' star Lee Na-young, director on creating subtle, feel-good series](https://img.koreatimes.co.kr/upload/thumbnailV2/796618f56a44402eabe81fe4530ab988.jpg/dims/resize/178/optimize)
