South Korea Ushers in Comprehensive Crypto Legislation
South Korea’s parliament has approved the country’s first comprehensive cryptocurrency law: the Virtual Asset User Protection Act. The legislation integrates 19 related bills and grants the Financial Services Commission (FSC) regulatory authority over cryptoasset operators and custodians. This bold step comes just over a year after the turbulent crash of the TerraUSD stablecoin and LUNA token, which led to increased calls for regulation.
Under the Act, virtual asset service providers (VASPs) must implement controls and procedures to safeguard users’ assets. Key measures include segregating customer assets from the provider’s assets, mandatory cold wallet storage for a portion of the held cryptoassets, insurance or reserves against computer hacking or network failures, and detailed recordkeeping for transaction verification.
The legislation also sanctions unlawful activities such as nonpublic information use, market manipulation, and fraudulent trading practices, while preventing VASPs from trading in cryptoassets they have issued themselves.
Singapore Bolsters Investor Protection
In a similar vein, the Monetary Authority of Singapore (MAS) announced new requirements for Digital Payment Token (DPT) service providers to hold customer assets under a statutory trust. These measures are designed to protect customers’ assets from loss or misuse and facilitate their recovery in case of insolvency. The new regulations also restrict DPT service providers from facilitating retail customer lending and staking of DPT tokens.
The announcement comes with a series of consultation papers outlining proposed amendments to existing regulations, focusing on segregation, custody requirements, and the prevention of unfair trading practices.
European Body Examines Crypto Risks
MONEYVAL, a monitoring body within the Council of Europe, recently published a report on money laundering and financing of terrorism risks posed by cryptoassets and VASPs. The report revealed the struggles faced by its members in implementing the Financial Action Task Force’s (FATF) Recommendation 15.
The study identifies exchanges, aggregators, and other crypto platforms, including e-gaming, sports betting, and non-fungible tokens (NFTs), as the primary means used by criminals to launder crime proceeds. It also examined the adequacy of law enforcement agencies’ powers and tools in investigating crimes involving cryptoassets.
Denmark Directs Saxo Bank to Liquidate Crypto Holdings
The Danish Financial Supervisory Authority (FSA) has directed Copenhagen-based multi-asset broker Saxo Bank to liquidate its cryptoasset holdings, concluding that digital asset trading is not permitted under the Financial Business Act. This move raises questions about the future of crypto trading within Denmark’s borders and the broader European financial ecosystem.
Thailand Aims for Investor Protection
In Thailand, the Securities and Exchange Commission (SEC) has issued new rules for VASPs focused on investor protection. The regulations require VASPs to explicitly warn customers about potential risks associated with cryptoasset trading. Additionally, these providers are prohibited from offering or supporting services related to deposit-taking and lending.
The global crypto landscape is continually evolving, and with it, regulatory approaches are being tailored to reflect the unique circumstances of individual jurisdictions. As countries around the world grapple with the challenges and opportunities of this new asset class, investors, stakeholders, and observers will keenly watch how these developments shape the future of global finance.
