Insights into South Korea’s two-part crypto regulatory framework


  • Stricter crypto laws in South Korea may deter illicit activities with potential life sentences.
  • Mandatory user protection measures, including cold storage, enhance security for investors.
  • Future regulations aim to standardize token issuance and improve investor information disclosure.

South Korea is set to implement stricter regulations on cryptocurrency activities, with high-level offenders facing the possibility of life imprisonment. The new law, slated to take effect is part of the country’s ongoing efforts to crack down on illicit activities within the crypto market.

South Korea harsh penalties for crypto criminals

The Financial Services Commission (FSC) of South Korea unveiled plans to impose severe penalties on individuals found guilty of engaging in illicit activities involving cryptocurrencies. 

Offenses under the new law could result in imprisonment for a minimum of one year or fines ranging from three to five times the amount of illegal gains. 

Furthermore, those who profit over 5 billion Korean won (approximately $3.76 million) from such violations may face life imprisonment or a penalty equal to double the proceeds.

Background and legislative framework

The genesis of this regulatory move traces back when South Korea‘s lawmakers passed the “Virtual Asset User Protection Act.” This legislation, which included a one-year grace period, targets the elimination of unlawful practices within the crypto sphere.

 Prohibited activities encompass utilizing undisclosed information for crypto investments, manipulating market prices, and perpetrating fraudulent transactions.

Enhanced user protection measures

In addition to punitive measures against offenders, the new law mandates cryptocurrency service providers to uphold stringent security protocols. Specifically, these entities are required to store over 80% of user deposits in cold storage, thereby enhancing fund security. 

Moreover, cryptocurrency platforms must enroll in insurance programs to facilitate potential compensation for users in the event of security breaches.

Future regulatory developments

South Korea’s regulatory agenda regarding cryptocurrencies comprises a two-part framework, with the initial phase focusing on combating illicit activities and bolstering user protection. 

The forthcoming phase of regulatory development aims to standardize crypto token issuance procedures and enhance information disclosure practices for investors. 

These efforts underscore the government’s commitment to fostering a transparent and secure environment for cryptocurrency-related activities.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Emman Omwanda

Emmanuel Omwanda is a blockchain reporter who dives deep into industry news, on-chain analysis, non-fungible tokens (NFTs), Artificial Intelligence (AI), and more. His expertise lies in cryptocurrency markets, spanning both fundamental and technical analysis.

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