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The South Korean government is taking steps to protect cryptocurrency investors from explosions like the Do Kwon Terra ecosystem tokens by passing a new cryptocurrency bill.
The South Korean Parliament on June 30 passed a law to protect users of virtual assets. The bill is intended to regulate unfair trading practices and protect investors in cryptocurrencies, according to local news agency SBS Biz.
The legislation reportedly consolidates 19 different cryptocurrency-related bills, providing a single bill that defines digital assets and imposes penalties for illegal trading activities such as using undisclosed information, market manipulation, and other unscrupulous cryptocurrency trading practices.
According to local media, the main point of the Virtual Asset User Protection Law is to first apply the Capital Market Law to virtual assets that have the nature of securities. The legislation also aims to establish a basis for imposing fines and liability for damages caused by unfair cryptocurrency trading.
To protect investors, virtual asset service providers (VASPs) in South Korea are now reportedly required to take responsibility for user deposits and provide insurance. Such measures are necessary to protect the user from hacking, computer failure and other risks.
According to a report by SBS Biz, breaking the new rules carries a prison term of at least one year or hefty fines. For example, for profits made from unfair trading, the Financial Services Commission may impose a fine equivalent to double the amount.
Related: Do Kwon Denies Passport Forgery and Blames ‘Chinese’ Agency: Report
The news comes shortly after Terraform Labs founder Do Kwon was sentenced by a court in Montenegro to four months in prison after being found guilty of using a fake passport. The chief executive also faces an arrest warrant in South Korea on charges of violating the country’s capital markets law.
The South Korean prosecutor’s office recently said that the collapse of the Terra tokens is the largest financial or securities fraud case to ever occur in the country.