South Korea Targets VASP Accountability With New Proposal

A South Korean lawmaker has proposed an amendment to better protect users of virtual assets in the country. Kim Hyun-jung, a member of the Democratic Party of Korea (DPK), therefore proposed a change to the Virtual Asset User Protection Act. It aims to increase transparency and accountability in the country’s growing virtual asset market.

This action comes as the crypto market grows in South Korea, with financial institutions moving into the digital asset space. The amendment seeks to improve communication between virtual asset service providers (VASPs) and the Financial Services Commission (FSC).

If passed, VASPs must immediately report any incidents that could disrupt their services, such as hacking or system failures.

Also, these providers must update their websites to keep users informed of any issues. This rule will keep customers updated during security breaches or service disruptions, which is key to keeping user trust.

Legislative Process and Expected Timeline

Despite the growth of the virtual asset market in South Korea, there are still challenges related to regulatory gaps and potential misuse within the sector.

Read also: South Korea Crypto Regulation: New Bill Targets Money Laundering

The proposed amendments are under review with South Korea’s Ministry of Economy and Finance, led by Choi Sang-mok. This suggests the law could take effect in 2025 if it gets legislative approval.

Increasing Scrutiny and Regulatory Efforts

Along with the proposed amendment, South Korea’s financial authorities see a rise in suspicious transactions. According to the Financial Intelligence Unit (FIU), such transactions increased by 48.8% in the past year.

This rise in suspicious activity has the Ministry of Economy and Finance thinking about adding new definitions for virtual assets and their merchants before the amendment is fully implemented.

While companies in South Korea still cannot own virtual assets, the country is heading toward regulatory changes that may allow it. Five major banks have already entered the virtual asset custody market. Hana Bank’s recent partnership with BitGo is a prime example.