- Chainalysis noted that South Korea’s new rule bans insider and wash trading.
- The Act also mandates criteria for listing new tokens and segregation of assets.
- VASPs must subscribe to insurance or maintain reserves to safeguard users.
Leading data analytics firm, Chainalysis, brought attention to the groundbreaking development in South Korea’s crypto landscape. The data analytics firm took to Twitter to highlight the implication of the Virtual Asset User Protection Act passed by the South Korean National Assembly last week.
1/7 On 30th June, the South Korean National Assembly passed the Virtual Asset User Protection Act, which establishes key safeguards for virtual asset users. What does the Act mean for digital asset players in Korea ?— Chainalysis (@chainalysis) July 3, 2023
The act assigns the Financial Services Commission (FSC) the responsibility of supervising Virtual Asset Service Providers (VASPs), which include various entities that facilitate virtual asset purchase, sale, exchange, transfer, and storage, such as brokers, platform operators, and custodians.
In line with this mandate, the FSC is anticipated to delegate day-to-day supervision tasks to the Financial Supervisory Service, enabling efficient monitoring of VASPs and their activities.
Furthermore, the Bank of Korea has been granted authority to request pertinent data from these businesses to maintain monetary and financial stability and promote the smooth functioning of payment and settlement systems.
Chainalysis further emphasized that the Act introduces vital requirements for VASPs, such as establishing comprehensive criteria and processes for listing new tokens. The FSC will scrutinize these criteria and suspend tokens from trading if illicit activities are suspected.
Additionally, the legislation mandates the segregation of users’ virtual assets, with a stipulated percentage to be held in cold wallets to protect users’ crypto portfolios against potential breaches and theft.
Furthermore, VASPs must subscribe to insurance coverage or maintain reserves to safeguard users from losing virtual assets to theft or technological failures.
The Virtual Asset User Protection Act also tackles market integrity concerns. It explicitly prohibits insider trading, collusion, and wash trading, aiming to combat market abuse effectively. Moreover, the Act restricts VASPs from trading tokens issued by themselves or related entities, ensuring a level playing field and preventing potential conflicts of interest.
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