Key Points and Implications of the Virtual Asset User Protection Act
Host: Director Han Chi-ho
Guest: Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm
Q. What are the key points and implications of the 'Virtual Asset User Protection Act'?
- The Virtual Asset User Protection Act was approved.
- Amendments and improvements were made to 19 previously proposed virtual asset-related bills.
Q. What are the key provisions of the 'Virtual Asset User Protection Act'?
① Unified definition of virtual assets
‣ The term ‘virtual asset’ is standardized.
‣ Central bank digital currencies (CBDCs) are excluded.
② Segmentation of virtual asset activities
‣ Activities such as buying, selling, and exchanging virtual assets will be segmented into specific business areas.
③ Application of regulations to foreign activities
‣ Regulations will apply to foreign entities if their activities have an impact in Korea.
④ Thorough protection of users
‣ Virtual asset service providers must separate users' deposits from their proprietary assets.
‣ Virtual asset service providers must keep transaction records for 15 years.
⑤ Expansion of unfair trading regulations
‣ A second phase of legislation is expected to legalize regulations on virtual asset issuance and disclosure.
‣ The enactment of virtual asset protection laws will strengthen the obligations and responsibilities of service providers.
Q. Prosecutors are reviewing the securities status of 'Wemix' amidst the controversy surrounding Kim Nam-guk’s holdings.
- Prosecutors are examining whether there was a violation of the Capital Markets Act.
Q. What are the relevant laws under the Capital Markets Act, and what are the penalties for violations?
- Article 178 of the Capital Markets Act:
‣ Engaging in fraudulent schemes, plans, or tricks related to trading of financial investment products.
‣ Omitting or providing false information in documents to gain financial benefits, or failing to provide crucial information to prevent misunderstandings.
‣ Manipulating prices with the intent to induce trading of financial investment products. - Violations of the law may result in imprisonment for at least one year or a fine of three to five times the amount of losses caused.
Q. Why is it argued that Wemix qualifies as an 'investment contract security'?
- Virtual assets are considered investment contract securities and should be punished under the Capital Markets Act for 'fraudulent trading.'
- Investment contract securities involve the joint investment of money into another's business.
- Prosecutors have acknowledged the 'securities status' of Luna, marking the first indictment of its kind in Korea.
Q. Prosecutors are reviewing the securities status of 'Wemix' amidst the controversy surrounding Kim Nam-guk’s holdings.
- "It is unlikely that virtual assets will be considered investment contract securities."
- "If Wemix is recognized as an investment contract security, 99% of coins currently in circulation may be delisted."
- Punishing virtual assets under the Capital Markets Act risks violating the principle of legality.
- There is no precedent in Korea regarding the interpretation of investment contract securities.
- "The Ripple vs. SEC lawsuit is still ongoing."
- "There is a need for new regulations and recognition of virtual assets as a new asset class."
