South Korea Sets July 2024 for Crypto User Protection Law Launch

• Korean regulators mandate crypto exchanges keep at least 80% of assets in cold storage and set compensation minimum if hacking occurs
• Market manipulation and fraud could lead to fines, criminal penalties, and even potential life imprisonment based on illicit gains
• New rules take effect in 2024 after advance notice period; exchanges provided compliance roadmaps and checklists

The Financial Services Commission of South Korea has announced new regulations for crypto exchanges, including a requirement to keep 80% of assets in cold storage. The regulations also prescribe harsh penalties for market manipulation and other crimes, with the potential for life imprisonment.

Rules and Consequences

Cold Storage Requirement

• Exchanges must keep 80% or more of assets in cold storage
• The remaining assets can be covered by insurance, reserves, etc.
• Compensation minimum set at 5% of offline assets if hacking occurs

Penalties for Misconduct

• Market manipulation and fraud can lead to fines and criminal penalties
• Gains over 50 billion won could mean life imprisonment
• Fines can range from 3-5x the amount of illicit gains

Preparing for Implementation

• Rules take effect July 19, 2024
• Exchanges given compliance roadmaps and checklists
• Feedback from advance notice period being reviewed
• Virtual Asset Investigation Regulations also coming

Conclusion

The new Korean crypto regulations aim to protect users and ensure fair trading practices. The cold storage rules and threat of steep fines or jail time signal authorities’ serious stance against misconduct. While stringent, the framework ultimately seeks to instill order and security in Korea’s crypto space.