South Korea's National Assembly has given the green light to the Virtual Asset User Protection Act, marking a significant stride towards establishing a legal structure for virtual assets.
The legislation is set to come into force next year.
The act, an amalgamation of 19 proposals put forth by legislators, provides a clear definition of digital assets and outlines penalties for any unfair transactions.
Service providers must now keep user assets separate, hold insurance, maintain a certain level of reserves in cold wallets, and keep a comprehensive record of all transactions.
"The bill empowers the Financial Services Commission with the authority to supervise and inspect service providers," the legislation reads. It also grants the Bank of Korea the prerogative to demand data from these service providers.
The legislation comes at a time when virtual assets are under increased scrutiny in South Korea, following an inquiry into a local lawmaker's crypto holdings and the downfall of Terraform Labs last year.