Table of Contents

1. Introduction of the Act on the Protection of Virtual Asset Users 

2. Relevant Regulations for Virtual Asset Projects
2-1. The Act of the Protection of Virtual Assets Users
2-2. Best Practices for Supporting Virtual Asset Transactions

3. Projects Response to the Introduction of Regulations
3-1. Periodic information disclosure via the information disclosure platform is required
3-2. Establishing a continuous support and verification system for on-chain data, including circulating supply

4. Closing Summary

 

1. Introduction of the Act on the Protection of Virtual Asset Users

On July 19, 2024, the Act on the Protection of Virtual Asset Users (the “Act”) was enacted, ending a long regulatory gap. This Act aims to protect users' assets and regulate unfair transactions. It primarily addresses the responsibilities of virtual asset service providers (mainly exchanges) as key market entry points. Additionally, projects that operate tokens in South Korea are subject to certain regulations under this Act, even if not classified as virtual asset service providers. They may be considered issuers or operators and must comply with specific rules. Thus, understanding these regulations and their potential impact is crucial for appropriate action. Xangle will examine the sections of the Act and DAXA's self-regulatory guidelines that might affect projects, identifying necessary measures for seamless operations.

 

2. Relevant Regulations for Virtual Asset Projects

For projects that issue tokens and operate services, the critical areas within the Virtual Asset User Protection Act include the regulation of unfair trading practices and DAXA's “Best Practices for Supporting Virtual Asset Transactions.” Xangle identifies the disclosure of significant information as a crucial area for projects to address.

2-1. The Act of the Protection of Virtual Asset Users

Projects must focus on the regulation of unfair trading practices. Article 10 prohibits such practices and broadly defines insiders with access to undisclosed important information, restricting their insider trading and collusion.

2-2. Best Practices for Supporting Virtual Asset Transactions

To ensure smooth operations in the South Korean market, it is essential for projects to have their issued virtual assets listed on local exchanges, making them accessible to users. Therefore, DAXA's “Best Practices for Supporting Virtual Asset Transactions,” as revealed in their press release, are crucial guidelines for projects to pay attention to. These best practices, implemented concurrently with the Act, include details on listing and delisting processes, review procedures, and information disclosure. While most of these best practices set standards for exchanges to follow, the “Listing Review Requirements” establish minimum criteria that all South Korean exchanges must adhere to. Consequently, all projects with tokens listed on South Korean exchanges need to pay close attention to these key aspects.

Listing Review Requirements

When listing new virtual assets, exchanges will consider both formal review requirements and qualitative review criteria. However, DAXA has only disclosed the formal review requirements, which focus on disqualification criteria to prevent market abuse. The formal review requirements are as follows: