Key Insights:
- South Korea introduces stricter regulations on dollar-pegged stablecoins to enhance cross-border transaction reliability.
- The Financial Services Commission prioritizes stablecoins in the upcoming legislative stage of the Virtual Asset User Protection Act.
- Domestic crypto exchanges must meet new asset storage and review requirements to protect users.
On the other side, South Korea is taking practical steps in the right direction to further fortify the regulations and laws for dollar-pegged stablecoins by building up reliability in cross-border transactions. The Ministry of Strategy and Finance disclosed fresh regulations that focused on the government to deal with the rising complexities brought about by digital currencies in order to further secure the financial world. This would amount to a key step in regulating the immensely growing market for stablecoins and commitment by South Korea to safeguard its digital economy.
New Regulations over Stablecoins in South Korea
The South Korean government has refined its policies related to USD-tied stablecoins, particularly for cross-border settlements. The Ministry of Strategy and Finance revealed its intention to reconsider regulatory approaches in order to enhance further the soundness of these virtual asset transfers. Of course, this is a growing concern that this token will have on the financial ecosystem.
This focus on stablecoins also goes in tune with the broader reach of the government for a robust regulatory framework. The prioritization of cross-border transactions will make sure for South Korea that its regulations can adequately address the complexities of digital currencies used in international trade and finance.
Cross-border Transactions Focus
The Government of South Korea is especially concerned with the implications of foreign exchange regulations on stablecoins pegged to the US dollar. As per the Ministry of Strategy and Finance, stablecoins provide an easy way of making transfers and conducting cross-border transactions. It may be necessary to consider specific guidelines while regulating such assets.
In the second legislative stage of the Virtual Asset User Protection Act, the FSC plans to focus on stablecoins. The commission will be in close cooperation with international regulators such as those of Japan and the European Union to bring the regulatory regime of South Korea into line with global standards.
It will be initiated under the new regulatory regime of South Korea with legal tokens linked to the South Korean Won. This is done as part of its aim to clearly outline guidelines for the issuance and use of stablecoins in the country. Regulators are looking to avoid riskier dependencies on foreign currencies by first beginning ties with local currencies.
In August, the government introduced a $220,000 supervisory fee for domestic crypto exchanges. This fee is based on the operating revenue of exchanges such as Upbit, Bithumb, and Coinone. The FSC plans to enforce these fees starting January 1, 2025, requiring operators to maintain a minimum percentage of user assets in secure storage.
Requirements for Crypto Exchanges
The Virtual Asset User Protection Act mandates that crypto exchanges keep at least 80% of user assets in cold storage, distinct from the exchange’s operational funds. This requirement aims to enhance user security and reduce risks associated with hacking or mismanagement.
Exchanges must also invest user assets in ‘risk-free’ options and conduct thorough reviews of listed assets. This includes evaluating the circulation and transparency of each asset’s whitepaper. Exchanges failing to meet these criteria will be required to delist non-compliant assets, ensuring safer trading.
Personal Note From MEXC Team
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