- South Korea’s new digital asset rules will require exchanges to pay interest on crypto deposits.
- The country has been ramping up regulation to protect consumers and increase transparency.
South Korea has published crypto rules requiring virtual asset services providers (VASPs) to pay customer fees for using their deposits. The draft rules, issued on Monday by the Financial Services Commission (FSC), do not apply to central bank digital currencies (CBDCs) and non-fungible tokens (NFTs).
Under the proposals, exchanges must keep 80% or more of the clients’ deposits in cold wallets. Besides, VASPs must obtain liability insurance or keep reserves compensating at least 5% of customers’ digital assets stored in hot wallets.
Other provisions include prohibiting digital firms from arbitrarily blocking customer deposits and withdrawals. Even in justifiable cases of blocking, VASPs must inform users in advance of the reasons for taking such an action.
South Korea will also require VASPs to monitor abnormal transactions on the platforms. Exchanges must report such transactions to the investigative and financial authorities.
See Related: South Korean Watchdog Goes After Crypto Whales To Enforce AML Compliance
Tightening Consumer Protection Rules
The FSC says the proposed rules aim to ” protect virtual asset users and establish a sound order in virtual asset transactions.” The rules come when South Korean regulators ramp up control and regulation of digital services.
In July this year, authorities issued another draft rule that mandates crypto companies to disclose their digital asset holdings. Authorities said the measures aim to increase transparency, in line with its Virtual Asset Protection Act.
The public now has until January 2024 to give their views about the new proposals for VASPs. The draft legislation comes into effect on July 19, 2024.
