The Financial Services Commission (FSC), South Korea’s regulatory authority, has issued a notice stipulating that as of July 2024, investors engaging in digital assets must be entitled to interest on their deposited funds within exchanges.
The guidance, however, explicitly excludes nonfungible tokens (NFTs) and central bank digital currencies (CBDCs) from the provisions of this law.
On Dec 10, reports from local media revealed that the Financial Services Commission (FSC) intends to unveil legislative guidance. While NFTs are excluded, the regulator acknowledged the possibility of exceptions.
The report indicates that tokens, classified as NFTs but serving as payment methods and issued on a large scale, could be considered within the virtual asset classification. In such instances, these assets might qualify for interest when deposited into exchanges.
In addition to categorizing virtual assets, the South Korean regulatory body has established guidelines for managing user deposits among virtual asset operators.
Preventing Hacks: South Korea’s New Guidance Requires Crypto Service Providers To Prepare
Moreover, the notice emphasized that exchanges are required to segregate user deposits from their assets and place them in the custody of a bank. Furthermore, it specified that 80% of the coins must be securely stored in a cold wallet.
The forthcoming guidance will encompass provisions regarding readiness for hacks or other computer incidents. The regulatory directive specifies that virtual asset service providers must secure insurance coverage or build reserves to address such contingencies.
The legislation concurrently forbids hindering deposits or withdrawals except when mandated by courts and financial regulatory bodies. Such restrictions are implemented in response to official requests, ensuring compliance with legal and regulatory frameworks.
South Korea has been strengthening its regulatory framework in the cryptocurrency sector. In December, the country’s financial regulators urged users to report unlicensed crypto exchanges operating within the region. The Digital Asset Exchange Association and the Financial Intelligence Unit of South Korea spearheaded this initiative.
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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.
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