'Coin Price Manipulation' Faces Maximum Life Imprisonment... Digital Asset Basic Act 'Speed Race'

Proposed Amendment to the Special Financial Transactions Act by Rep. Lee Young of the People Power Party
Includes Enhanced Penalties of 5 Years to Life Imprisonment for Coin Price Manipulation
Fines of 3-5 Times Illicit Gains, Liability for Damages, and Forfeiture

Flood of Amendments to the Virtual Asset Basic Act and Electronic Financial Transactions Act Prohibiting Price Manipulation
President Yoon's Pledge for Enactment of the 'Digital Asset Basic Act' Expected to Accelerate

[Asia Economy Reporters Ji Yeon-jin and Lee Jung-yoon] A bill is being promoted to punish with up to life imprisonment those caught making unfair profits through price manipulation in the cryptocurrency market. Due to the Terra incident, which wiped out 50 trillion won in market capitalization within a week, the Digital Asset Basic Act, a campaign pledge of President Yoon Seok-yeol aimed at protecting virtual asset investors, is expected to accelerate.

According to the National Assembly Legislative Information System on the 18th, Lee Young, a member of the People Power Party, has submitted a "Special Financial Transaction Information Act (Special Act on Reporting and Using Specified Financial Transaction Information, or Special Act)" amendment containing such provisions, which is currently pending in the first subcommittee of the National Assembly's Political Affairs Committee.

The amendment stipulates that if the loss caused by cryptocurrency price manipulation exceeds 5 billion won, the offender shall be sentenced to life imprisonment or imprisonment for more than five years; if the loss is between 500 million won and less than 5 billion won, imprisonment for up to three years shall be imposed. Additionally, fines amounting to three to five times the damage amount will be imposed, and compensation for damages, asset confiscation, and seizure will also be possible.

As the virtual asset market rapidly expanded last year, a flood of bills aimed at investor protection and the development of the virtual asset market have been introduced in the National Assembly. The partial amendment to the Special Act on Reporting and Using Specified Financial Transaction Information, proposed by Lee Joo-hwan of the People Power Party, includes a provision prohibiting unfair trading practices such as price manipulation by virtual asset service providers. Violations may result in imprisonment for more than one year or fines amounting to three to five times the loss amount. Furthermore, responsibility for compensation for damages is also imposed.

Damage from unfair trading in virtual assets has recently been on the rise. According to the National Police Agency, the number of cases detected for illegal activities related to virtual assets increased approximately 7.1 times from 41 cases in 2017 to 333 cases in 2020, and the annual damage amount also surged significantly from 169.3 billion won in 2018 to 2.9266 trillion won as of September last year.

However, laws that can punish such illegal activities are insufficient. Although charges such as forgery of electronic records under the Criminal Act have been applied and punishments imposed, most cases have resulted in acquittals. Therefore, more than 12 bills prohibiting price manipulation are currently pending in the National Assembly. Last year, seven bills related to the Digital Asset Basic Act, including those by Kwon Eun-hee of the People Power Party and Min Hyung-bae, an independent lawmaker, included regulations, and four lawmakers including Park Yong-jin of the Democratic Party of Korea proposed amendments to the Electronic Financial Transactions Act to punish virtual asset price manipulation.

[Image source=Yonhap News]

Such matters are also expected to be discussed during the enactment process of the Digital Asset Basic Act, a campaign pledge of President Yoon. According to the pledge implementation plan submitted by the Financial Services Commission to President Yoon’s transition committee, the Digital Asset Basic Act will be enacted by next year and implemented from 2024. A report commissioned by the Financial Services Commission to the Korea Capital Market Institute at the request of the National Assembly also included provisions that if unfair profits are obtained through coin price pumping, insider dumping, false orders, etc., criminal penalties such as fines and imprisonment, as well as civil and administrative sanctions including compensation for damages and punitive surcharges, should be imposed.

The enactment of the Virtual Asset Industry Act is expected to gain momentum due to the recent Terra incident. Asset regulation is being actively strengthened worldwide. Although Terra is a domestic coin issued by a Korean, it was traded more globally. Terra and Luna, which rapidly grew through staking that pays an annual yield of 10%, ranked around 30th in market capitalization domestically as of the end of last year, but were among the top 10 large coins on global virtual exchanges. Because of this, U.S. Treasury Secretary Janet Yellen directly mentioned the Terra incident immediately after it occurred, stating that "Terra (UST)'s $1 peg was broken," emphasizing the need for stablecoin regulation.

This content was produced with the assistance of AI translation services.