Accelerating progress in the Asian crypto landscape has been witnessed as a surge of regulations flow into the market recently. Highlighted was the legislative leap made by South Korea, addressing unfair trading within the cryptocurrency arena. They passed the ‘Virtual Asset User Protection’ legislation on June 30; an amalgam of 19 distinct crypto-related bills wrapped neatly into one remarkable package.
The intent behind the act is multifaceted. For starters, it sets the Capital Market Act as the first point of reference for virtual assets possessing securities characteristics. Also, the legislation is unequivocally intended to safeguard investors’ interests and protect them from any ill-begotten gains from shady crypto practices.
The myriad threats to crypto investors are enormous and diverse. Market manipulation, undisclosed information usage and unfair trading practices prevalent in the vast crypto landscapes are just the tip of the iceberg. This new act does not simply impose penalties or threaten jail time but aims to eliminate these issues from the root.
Another crucial feature of this legislature requires Virtual Asset Service Providers (VASPs) in South Korea to shoulder the responsibility of users’ deposits and insurance provision. A step deemed necessary to protect users against a variety of risks such as hacks, computer failures, and the like.
The regulatory move was not without its draconian sledgehammer. The promising roadmap of regulation was also overshadowed by the potential for hefty penalties. Violators face a minimum of one year imprisonment or severe financial ramifications. For instance, profits earned from unfair trading practices could be subject to a penalty double the total amount.
A notable mention of this new regulatory act was its prompt implementation following a considerable scandal involving the Terraform Labs founder, Do Kwon. Following his conviction for the usage of a false passport, South Korea has issued an arrest warrant against him on allegations of violating the country’s capital markets law.
South Korea’s newfound legal steps towards crypto regulation are certainly understandable in light of both investor protection and the fight against fraudulent trade practices. However, the severity of penalties and the increasing oversight of the governmental body may grow into a stifling environment for potential innovators and entrepreneurs in the sector.
While the function and necessity of such regulations are indubitably complex, their ultimate usefulness will be determined by how successfully they can maintain a delicate balance. This balance, between ensuring fairness, security, innovation, entrepreneurship, and growth, remains to be seen in what is unarguably the wild world of crypto.
Source: Cointelegraph
