South Korea’s New Crypto Regulation Comes Into Effect

South Korea’s much-anticipated Virtual Asset User Protection Act (VAUPA) has officially taken effect, a significant step in regulating the country’s booming cryptocurrency market. The purpose of VAUPA is to create a stable environment for virtual assets and ensure the safety of users.

As part of this effort, cryptocurrency exchanges are now required to adhere to stricter custody procedures. Specifically, they must store 80% of user deposits in cold storage, which is an offline storage method that protects against cyber-attacks.

Additionally, fiat deposits must be held in regulated banks, keeping them separate from exchange funds. In order to discourage illegal activities such as market manipulation, exchanges must implement real-time monitoring systems to detect suspicious trading behavior.

Non-compliant exchanges may face penalties or service suspensions from the Financial Services Commission (FSC), South Korea’s main financial regulator.