1. Reasons for Enactment
The Act on the Protection of Virtual Asset Users, etc. will be enforced on July 19, 2024 and accordingly, this Enactment prescribes matters delegated to the Enforcement Decree, Supervisory Regulations, and other subordinate regulations.
2. Major Provisions
A. Scope of virtual assets (Article 2 of the Decree, Article 2 of the Regulations)
- Prescribe that (1) electronic receivables, (2) mobile gift certificates, (3) deposit tokens, and (4) NFTs (non-fungible tokens), which are unique and cannot be interchanged with each other, shall be excluded from the scope of virtual assets
B. Protection of users’ deposits (Article 5 of the Decree, Articles 4 through 8 of the Regulations)
- Specify banks as the custodians of deposits, and stipulate that custodians shall keep users’ deposits separate from their own property and invest them only in safe assets such as government and municipal bonds
C. Safekeeping of users’ virtual assets (Article 6 of the Decree, Article 9 of the Regulations)
- Specify that 80% of the economic value** of users’ virtual assets shall be held in cold wallets* and prescribe that virtual asset service providers shall calculate and manage this percentage every month
* A means of keeping virtual assets offline for security
** The sum of the amounts calculated by multiplying the total quantity of each type of virtual asset by the average KRW equivalent for the past year
D. Guidelines on enrolling in insurance/mutual aid programs or accumulating reserves (Article 7 of the Decree, Article 10 of the Regulations)
- Prescribe guidelines for virtual asset service providers to enroll in insurance/mutual aid programs or accumulate reserves to fulfill their liabilities or obligations in the event of accidents such as hacking and computer failures
E. Retention of transaction records, etc. (Article 8 of the Decree)
- Prescribe the types of transaction records to be retained by virtual asset service providers for 15 years including the type of transaction, quantity, amount and the other party to the transaction, address of the virtual asset, access records, etc.
F. Scope of information disclosure in prohibiting the use of material non-public information (Article 9 of the Decree)
- Prescribe additional regulations to ensure that the method and time of recognition of the disclosure of material information relation to the prohibition of the use of material non-public information are suitable for the nature of the virtual assets market
G. Prohibition of discretionary blocking of deposits and withdrawals of virtual assets (Article 11 of the Decree)
- Prescribe justifiable grounds for virtual asset service providers to block deposits and withdrawals of users’ virtual assets, such as cases where such action has been requested by a court of law or an investigation agency, etc.
H. Scope of abnormal transactions subject to continuous monitoring (Article 12 of the Decree)
- Prescribe that the scope of abnormal transactions subject to continuous monitoring by virtual asset service providers that establish and operate virtual asset markets shall be cases where there is clear fluctuation in the prices or trading volumes of virtual assets, etc.
