South Korea Passes New Crypto Law in Terra Wake

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More than a year after the collapse of Do Kwon Terra's empire, South Korea is taking a decisive step forward. The government has enacted a new law, the Virtual Asset Consumer Protection Act, aimed at protecting investors from such dire risks, according to a Bloomberg report.

This law traveled through the National Assembly on June 30 in response to growing concerns about “fair” business practices in the crypto market. According to SBS Biz, a local news outlet, the law is a major step towards creating a safer environment for crypto investors in South Korea.

“Use of undisclosed valuable information, manipulation of market prices and illegal transactions are defined as unfair business practices.”

South Korean prosecutor Dan Sunghan told Bloomberg in early June that Terra's collapse was “one of the biggest cases of money laundering or securities fraud ever to happen in South Korea.” This underscores the urgency and importance of the new law, which demonstrates the government's commitment to protecting its citizens in the fast-growing world of cryptocurrency.

Terraform Labs founder and former CEO Do Kwon and former financial officer Han Chang-jun were each sentenced to four months in prison by Montenegrin courts for possessing two fake passports and one fake ID card. The former executive is also at risk of being extradited to South Korea for violating the country's capital market law.

The law is a comprehensive piece of legislation that integrates 19 different crypto-related bills. It provides a clear description of digital assets and establishes a legal framework to punish illegal commercial activities. These practices include the use of anonymous data, market manipulation, and other fraudulent practices plaguing the crypto world.

“By restricting the transactions of self-issued virtual assets by virtual asset operators, preventing virtual asset deposits and withdrawals from being blocked without sufficient reason, monitoring the virtual assets market for unusual transactions, and taking appropriate measures.”

The main focus of the law, according to local media reports, is to apply the Capital Markets Act to digital assets that have securities characteristics. Liability for losses from unfair crypto trading will follow, with the Bank of Korea allowed to regulate platforms and digital assets in such cases.

It also mandates virtual asset service providers (VASPs) in South Korea to take responsibility for user deposits, keep detailed records, and provide insurance to establish sound investor protection.

Failure to comply is punishable by at least one year in prison or a hefty fine. For example, the Financial Services Commission has the power to impose fines of up to twice the profits of unfair trading, which provides consumers with a safety net to protect them from risks such as hackers or computer crashes.

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