Legal Review of a Virtual Asset Automation Program and Terms of Use Revision Advisory Completed

Client Information

Corporate / Business Entity

 

Case Details

The client was a company developing and providing an automation program for users of a blockchain-based platform.

The program was designed to automatically claim token rewards periodically available to users and to procure the gas or transaction fees required for such on-chain transactions by using assets held in the users’ own wallets.

Users connected their virtual asset wallets to the program, and the program executed repetitive on-chain processes such as reward claims and swaps based on conditions pre-set by the users.

The client requested Decent Law Firm to review whether the service would be subject to virtual asset service provider, or VASP, registration requirements under Korea’s Specific Financial Information Act and the Virtual Asset User Protection Act.

The client also requested a review of whether its existing Terms of Use could create legal or regulatory risks.

Under Article 2, Paragraph 2 of the Virtual Asset User Protection Act, a virtual asset service provider generally refers to a person who conducts, as a business, the sale, purchase, exchange, transfer, custody or management of virtual assets, or the brokerage, intermediation or agency of such sale, purchase or exchange.

The Specific Financial Information Act also imposes registration obligations on virtual asset service providers, and unregistered business operations may result in criminal liability.

Based on the principle that VASP status is determined by the actual structure and operation of the service rather than its name or external appearance, Decent Law Firm reviewed the following key issues.


1. Whether User Assets Were Transferred Outside the User’s Wallet

Decent Law Firm reviewed whether the user’s virtual assets were transferred to the service provider’s wallet or to any third-party wallet.

The review confirmed that all on-chain transactions were executed within the user’s own wallet, and that user assets did not pass through the company’s wallet or any third-party wallet.

This was a key factor in assessing whether the service could be viewed as virtual asset custody or management.


2. Who Determined the Transaction Conditions

Decent Law Firm examined whether the company independently determined transaction timing, quantity, counterparties or other transaction conditions.

The program operated only within the conditions and scope pre-set by the user. The company did not arbitrarily determine transaction timing, transaction volume or transaction counterparties.

This point was important in assessing whether the service could be considered brokerage, intermediation or agency of virtual asset transactions.

The review also considered recent Korean court decisions, including the Supreme Court’s position that VASP status should be determined by comprehensively reviewing the purpose, type, scale, duration and manner of the relevant virtual asset transactions.


3. Private Key Management Structure

Because the service involved the use of users’ private keys for transaction execution, Decent Law Firm reviewed whether the company independently held or controlled the private keys or could dispose of user assets at its own discretion.

The review confirmed that the private keys were managed in encrypted form through a recognized security infrastructure and were used only for the technical purpose of executing transactions within the user’s pre-set scope.


4. Consistency of the Terms of Use

Even if the actual service structure is non-custodial, legal risks may arise if the Terms of Use include provisions that could be interpreted as granting the company broad authority over user assets.

Expressions suggesting virtual asset management, discretionary control, asset operation, or comprehensive delegation of authority may work unfavorably in regulatory review or legal disputes.

Decent Law Firm identified certain provisions in the existing Terms of Use that were not fully aligned with the actual non-custodial service structure and provided recommendations for revision.