South Korea’s new cryptocurrency law, the Virtual Asset User Protection Act (VAUPA), took effect from July 19 as the country’s Financial Services Commission stressed on the need for virtual asset service providers to safeguard customer funds and comply with national regulations.

The Virtual Asset User Protection Act was enacted on July 18, 2023 and financial institutions covered under it were given time to put in place compliance measures. From late last week, however, the new law began to be enforced.

The Act on the Protection of Virtual Asset Users focuses on protecting user assets, regulating unfair trading activities, and giving financial regulators the powers they need to investigate financial institutions dealing in virtual assets.

In particular, the South Korean administration will require the safe storage of customer deposits at banks, along with the requisite fees. Any suspicious transactions are to be reported without any delay.

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“The FSC expects that the implementation of the Virtual Asset User Protection Act will establish a foundation to provide safe protection for users. As it becomes possible to bring severe penalties against those engaging in unfair trading activities, it is also expected to help establish a sound order in the virtual asset market,” said a press release from the country’s Financial Services Commission.

However, the South Korean regulator added that the law did not guarantee the safety of user’s virtual assets. It advised them to exercise caution when dealing with monetary assets in general.

South Korea has a booming crypto market and a strong community of investors.

Other traders worldwide also use the services of Korean crypto exchanges in order to benefit from their slightly higher asset prices at times, when compared to exchanges in other regions. This is known as the “Kimchi Premium.”