"Maximum Life Sentence for Coin Crimes"... Korean-Style Coin Run Regulation Bill Gains Momentum

People Power Party Digital Asset Special Committee Holds 4th Meeting Today
Discussing Legislative Direction for Digital Asset Basic Act

Special Committee Chair Introduced Bill Last Month Containing Common User Protection Provisions for 14 Virtual Asset Laws
Includes Provisions Prohibiting Unauthorized Access to Exchanges and Criminal Penalties for Unfair Trading
Financial Services Commission Can Also Conduct Raids for Coin Price Manipulation...Penalties Significantly Strengthened Compared to Existing Capital Market Act

[Asia Economy Reporter Ji Yeon-jin] Following the bankruptcy of FTX, the world's second-largest virtual asset exchange by trading volume, legislation regulating domestic digital assets is expected to gain momentum. The government and the ruling party have launched a drive to establish a 'Digital Asset Basic Act' focused on investor protection, including penalties of up to life imprisonment for coin-related crimes.

The People Power Party's Digital Asset Special Committee will hold its 4th meeting on the afternoon of the 14th at the National Assembly to discuss the direction of the Digital Asset Basic Act, the current status of investor protection at digital asset exchanges, and improvement measures. Key figures from the government and ruling party policy leadership, including Joo Ho-young, floor leader of the People Power Party, Sung Il-jong, chairman of the Policy Committee, Kim So-young, vice chairman of the Financial Services Commission, and Lee Myung-soon, senior official of the Financial Supervisory Service, will attend along with representatives from virtual asset exchanges, academia, and legal professionals.

Earlier, on the 31st of last month, Yoon Chang-hyun, chairman of the special committee and a member of the People Power Party, reflected common provisions on user protection and prohibition of unfair trading found in 14 previously proposed virtual asset-related bills to representatively propose the 'Act for the Restoration of Fairness in the Digital Asset Market and the Creation of a Safe Trading Environment.' Yoon explained, "Rather than blindly waiting for international discussions and the establishment of global standards, it is a situation where it is deemed appropriate to first establish a regulatory framework for user protection through the minimum necessary regulations and then gradually and stepwise pursue legislation to supplement this later."

[Image source=Reuters Yonhap News]

This bill focuses on provisions protecting user deposits from the bankruptcy of digital asset service providers such as virtual asset exchanges and regulating unfair trading such as coin price manipulation. Issuance, listing, and disclosure of digital assets will be supplemented next year reflecting discussions by international organizations.

In particular, the bill includes a clause that digital asset service providers must not block deposits or withdrawals of users' virtual assets without justifiable reasons. In cases where digital asset deposits or withdrawals are blocked, users must be notified in advance, and the Financial Supervisory Service chief must be immediately reported. Similar to securities market regulations, the bill also includes provisions prohibiting unfair acts such as trading using undisclosed information related to duties, self-dealing, and coin price manipulation.

Penalties have been significantly strengthened compared to current capital market unfair trading laws. For suspected coin unfair trading acts, Financial Services Commission officials are authorized to conduct searches and interrogations, and violations are punishable by imprisonment of one year or more or fines ranging from three to five times the amount of profit gained or loss avoided. In particular, if the profit or avoided loss exceeds 5 billion KRW, life imprisonment or imprisonment of five years or more is possible. For amounts between 500 million KRW and 5 billion KRW, severe sentences of imprisonment for three years or more are imposed.

Initially, the Financial Services Commission, which was to directly prepare government proposals related to digital assets, shifted its stance in May to actively participate in National Assembly legislation following the Luna-Terra incident, which caused significant losses to coin investors. Kim Joo-hyun, chairman of the Financial Services Commission, stated at last month's National Assembly audit, "Internally, we are preparing the law through a June service, but since it takes a lot of time and there are already 14 bills related to virtual assets in the National Assembly, if discussions proceed quickly, it is necessary to legally supplement areas with gaps in the two main pillars of illegal fund transactions: the Financial Intelligence Unit (FIU) and investigative agencies."

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