'Enforcement Decree of the Act on the Protection of Virtual Asset Users' Draft Approved at Cabinet Meeting
Even if a virtual asset service provider goes bankrupt, users can recover their deposits from banks. Additionally, deposits and withdrawals can be blocked for virtual assets related to illegal properties such as criminal proceeds.
The Financial Services Commission announced that the Enforcement Decree of the "Virtual Asset User Protection Act," which regulates the details of the Act effective from July 19, was approved at the Cabinet meeting on the 25th.
The law defines virtual assets as "electronic certificates that have economic value and can be electronically traded or transferred," consistent with the current Act on Reporting and Use of Certain Financial Transaction Information.
According to the Enforcement Decree, users' deposits must be stored in reputable banks and managed as safe assets. In the event of bankruptcy of a virtual asset service provider or cancellation of the business registration, the bank must announce the payment timing and location in daily newspapers and on its website, and directly pay the deposits to users.
Virtual asset service providers must separate and store at least 80% (or a ratio determined by the Financial Services Commission) of users' virtual assets, covering at least 70% of the users' virtual assets, separately from the internet.
Electronic bonds, mobile gift certificates, as well as deposit tokens and non-fungible tokens (NFTs) are excluded from the scope of virtual assets.
The Financial Services Commission will establish the Virtual Asset Committee, chaired by the Vice Chairman of the Financial Services Commission, to advise on virtual asset policies and systems.
The Enforcement Decree defines abnormal transactions as cases where the price or trading volume of virtual assets fluctuates abnormally, or when rumors or reports that may affect the price of virtual assets exist.
Once the law is enforced, unfair trading practices can be punished with up to life imprisonment. The Enforcement Decree also stipulates the method for calculating unjust profits, which determines the level of punishment for unfair trading practices.
In particular, the method for calculating unjust profits is specified in detail by categorizing realized profits, unrealized profits, and avoided losses according to types of unfair trading practices (use of undisclosed important information, market manipulation, fraudulent trading).
The Enforcement Decree also stipulates justifiable reasons for virtual asset service providers to block users' deposits and virtual asset deposits and withdrawals, such as unavoidable cases including information and communication network system failures, maintenance and inspection, and hacking incidents.
If deposits and virtual assets are related to illegal properties such as criminal proceeds generated from serious crimes under the Act on the Regulation and Punishment of Criminal Proceeds Concealment, deposits and withdrawals can be blocked for up to six months if such provisions are included in the terms and conditions.
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