The South Korean government is on the path to monitoring crypto transactions through continuous monitoring of its cryptocurrency exchanges.
The new system will be put in place on July 19, which is also the date when the new Virtual Assets User Protection Act will come into effect.
The Financial Supervisory Service (FSS), South Korea’s authorized financial regulatory body, is the proponent of this new directive.
With the implementation of the new monitoring system, the concerned government authorities will be alerted when a fraudulent crypto transaction happens in any online exchange so that they can protect the consumer interest at the earliest.
29 Cryptocurrency exchanges will be brought under the purview of this law. That will bring 99.9% of all crypto transactions under the monitor. South Korea aims to beef up the crypto transactions ahead of the new policy changes aimed at making the country a safe haven for digital coins.
Moreover, the FSS issued strict guidelines to exchanges for identifying fraudulent transactions and other unsolicited activities and taking the necessary action to counter them well before a huge loss happens to the investor.
Some of the illegal activities that come under the purview of this system include using wrong or undisclosed information to build up the authenticity of a transaction, manipulating the market price in favor of any stakeholder, and manipulating the circulation data to show unreal market trends.
The new regulation brings forth a data transmission line through which the exchange authorities can report any suspicious on-chain activities immediately so that FSS can take prompt actions.
Other Guidelines for the Market
In addition to what was mentioned above, the FSS has also brought forth guidelines for token listing on various exchanges.
The new regulation stipulates that the exchanges enroll in insurance programs to cover any loss incurred due to theft or other frauds. There is also regulatory oversight regarding stablecoins and other institutionalized crypto trading platforms.
The efforts of the Digital Asset Exchange Alliance (DAXA) to evaluate 1333 cryptocurrency tokens traded in the nation over the course of the next six months are sustained by the new regulatory legislation. This comes under the new code of conduct for local cryptocurrency firms.
The Effect of the New Regulations on the South Korean Cryptocurrency Market
South Korea is a giant market for the digital coin network. Almost 10% of the population of the country uses cryptocurrencies. South Korea is a breeding ground for many altcoins.
The proposed regulations aimed at the purgation of the crypto market can have a great impact on the world economy at large. The new regulations are aimed at safeguarding cryptocurrency dealers, but their strict implementation may be seen as a deterrent to the smooth working of the sector.
The act requires customer transaction accounts to be separated from the accounts by the Virtual Asset Service Providers (VASPs) to ensure that the customers’ virtual assets are stored in a separate format.
The VASPs are not allowed to trade self-issued virtual assets hereafter. They should monitor any suspicious activity and act immediately in the best interest of the consumer assets.
The act, which stipulates stringent punishments for any untoward incident with hefty penalties such as a minimum of one year of imprisonment or a fine of three to five times the illicitly gained amount, will serve as a means of preventing fraud.
But the fact that these strict regulations will make people think twice before making any crypto investments henceforth should not be dismissed.
The major feature of the decentralized crypto markets is the absence of strict regulations; these regulations, even though aimed at the best interest of the consumers, can also make the digital token market out of its reach.
The Bottom Line
With the implementation of the new act, every nitty-gritty of cryptocurrency transactions will come under scrutiny. The market under the watch of the regulatory eyes will hopefully see a reduction in the discrepancies that used to mar the digital landscape till now.
If the regulations become successful in the South Korean market, there is an increased chance that other cryptocurrency markets will also follow suit in implementing such laws. Thus, the decentralized financial sector will grow and flourish manifold.
