South Korea’s government is taking steps to protect cryptocurrency investors from implosions like Do Kwon’s Terra ecosystem by passing a new crypto bill.
On June 30, the National Assembly passed the Virtual Asset User Protection legislation. The bill is designed to regulate unfair trade practices and protect crypto investors, the local news agency SBS Biz reported.
The legislation reportedly integrates 19 crypto-related bills, providing a unified bill defining digital assets and imposing penalties for illicit trading activities like using undisclosed information, market manipulation and other unfair trading practices in crypto.
According to local media, the main point of the Virtual Asset User Protection Act is to apply the Capital Market Act first to virtual assets with a securities nature. The legislation also aims to establish a basis for imposing penalties and liability for damages caused by unfair crypto trading.
To protect investors, virtual asset service providers (VASPs) in South Korea are now reportedly required to take responsibility for users’ deposits and provide insurance. Such measures are necessary to ensure user protection against hacks, computer failure and other risks.
According to the SBS Biz report, violation of new rules is subject to fixed-term imprisonment of not less than one year or major fines. For example, the Financial Services Commission can impose a penalty equivalent to twice that amount for profits gained from unfair trade.
The news comes soon after Terraform Labs founder Do Kwon was sentenced to four months in prison by a court in Montenegro after being found guilty of using a false passport. The exec also faces an arrest warrant in South Korea on allegations of violating the country’s capital markets law.
South Korean prosecutors recently claimed that Terra’s tokens collapse is the largest financial fraud or financial securities fraud case that has ever happened in the country.