Up to Life Imprisonment for Fraudulent Virtual Asset Transactions

'Virtual Asset User Protection Act' Effective July 19
Prohibition of Price Manipulation and Use of Undisclosed Important Information

The price display board at Bithumb Customer Support Center in Seocho-gu, Seoul shows the prices of major cryptocurrencies including Bitcoin. Photo by Jinhyung Kang aymsdream@

Starting from July, market manipulation, fraudulent transactions, and the use of undisclosed material information related to virtual assets will be prohibited. Violators may face life imprisonment if the amount of illicit gains exceeds 5 billion KRW.

The Financial Services Commission announced on the 7th that the "Virtual Asset User Protection Act" containing these provisions will be enforced from July 19.

According to the enforcement decree and supervisory regulations, market manipulation, fraudulent transactions, and the use of undisclosed material information concerning virtual assets are banned. Violations may result in criminal penalties including imprisonment for more than one year, or fines ranging from three to five times the amount of illicit gains.

Additionally, virtual asset exchanges and related businesses must manage users' deposits through banks. Virtual asset service providers are required to securely store at least 80% of the economic value of users' virtual assets offline, separated from the internet.

Virtual asset service providers must also subscribe to insurance or mutual aid, or set aside reserves equivalent to at least 5% of the economic value of virtual assets, excluding those stored offline, to cover liabilities arising from incidents such as hacking or system failures.

The financial authorities will supervise and inspect whether virtual asset service providers properly comply with the Virtual Asset User Protection Act. They may investigate individuals suspected of unfair trading practices such as market manipulation or other related parties by requesting submission of documents and statements. If violations are found, the Financial Services Commission may take measures including business suspension, corrective orders, filing complaints, or notifying investigative agencies against virtual asset service providers.