South Korean legislators passed a first phase review of proposed regulations that would give the nation’s Financial Services Commission authority to investigate and supervise financial activity related to “digital assets,” including cryptocurrency.
The proposed bill comes with myriad stipulations governing the sale, storage, and trading of cryptocurrencies with particular emphasis on consumer protection and compliance reporting.
Ruling People Power Party’s Digital Asset Special Committee member Hwang Suk-jin told media outlet Forkast that “both the ruling and opposition parties have agreed on the matter,” before suggesting the legislation would become law by the end of the year.
Related: Bank of Korea given right to investigate local crypto firms
If passed, the bill would become one of the most sweeping pieces of national cryptocurrency legislation in existence. It would require exchanges and similar service providers to separate internal holdings from user assets, carry insurance, and maintain reserves in the event of non-market-related losses.
Central bank digital currencies (CBDCs) and assets tied directly to the Bank of Korea are the only reported exceptions.
Businesses and individuals participating in the cryptocurrency economy in South Korea will also be required to self-report irregularities in order to maintain compliance.
If a business or individual runs afoul of the proposed legislation, the commission has included recommendations for punishments that would impose relatively stiff penalties.
According to Forkast, the bill contains language indicating that those convicted for infractions resulting in losses less than approximately $3.75 million, such as “failing to include required information in investor disclosures, price manipulation, and false promotion of crypto assets,” could face fines in the amount of three to five times the total losses and up to a year in prison.
Crimes resulting in losses over the $3.75 million mark noted in the legislation would be punishable with sentences ranging from five years to life in prison.
For comparison, the CEO of Titanium Blockchain, recently convicted in the U.S. for defrauding consumers for $21 million, received a sentence of four years and three months.
The legislation was announced in June of 2022, just a month after the collapse of the Terra ecosystem triggered massive declines in the cryptocurrency sector. Terraform Labs co-founder Shin Hyun-seong and nine others were subsequently indicted by the South Korean government.