CHAPTER I GENERAL PROVISIONS
The purpose of this Act is to protect the rights and interests of virtual asset users and to promote the establishment of transparent and sound trading practices in the virtual asset markets by prescribing matters regarding the protection of virtual asset users’ assets, the regulation of unfair trade practices, and related matters.
The terms used in this Act are defined as follows:
| 1. | ?The term "virtual asset" means electronic certificates (including all associated rights) that have economic value and that can be traded or transferred electronically: Provided, That the following shall be excluded: |
| (a) | Electronic certificates or information regarding such certificates that cannot be exchanged for monetary value, goods, services, etc., and for which the issuer has restricted the place and purpose of use; |
| (g) | Digital currencies issued by the Bank of Korea under the Bank of Korea Act (hereinafter referred to as the "Bank of Korea") and services related to those currencies; |
| (h) | Others prescribed by Presidential Decree taking into account the forms and characteristics of transactions; |
| 2. | The term "virtual asset service provider" means a person that engages in any of the following acts in connection with virtual assets: |
| (a) | The buying or selling of virtual assets (hereinafter referred to as "trading"); |
| (b) | The exchange of one virtual asset for another; |
| (c) | The transfer of virtual assets, as prescribed by Presidential Decree; |
| (d) | The safekeeping and administration of virtual assets; |
| (e) | The provision of brokerage, intermediation, or agency services in connection with the acts under item (a) or (b); |
| 3. | The term "user" means a person whose virtual assets are traded, exchanged, transferred, held in custody, or administered by a virtual asset service provider; |
| 4. | The term "virtual asset market" means a market where the trading or exchange of virtual assets may take place. |
| Article 3 (Application to Acts Performed Overseas) |
This Act shall also apply to any acts performed overseas to the extent that such acts have an impact on the Republic of Korea.
| Article 4 (Relationship to Other Statutes) |
Except as otherwise provided in other statutes, this Act shall apply to virtual assets and virtual asset service providers.
| Article 5 (Establishment of Committees Related to Virtual Assets) |
| (1) | The Financial Services Commission may establish and operate a committee related to virtual assets to provide advice and suggestions on policies and systems regarding virtual asset markets and virtual asset service providers under this Act or other statutes or regulations. |
| (2) | Matters necessary for the composition, operation, etc. of the committee under paragraph (1) shall be prescribed by Presidential Decree. |
CHAPTER II PROTECTION OF USERS’ ASSETS
| Article 6 (Protection of Deposits) |
| (1) | Virtual asset service providers shall segregate users’ deposits (referring to the funds received from users in connection with the trading, trading brokerage, and other related business activities; hereinafter the same shall apply) from their own deposits by depositing those funds with or entrusting them to a reputable institution prescribed by Presidential Decree (hereinafter referred to as "custodian") such as a bank under the Banking Act. |
| (2) | If a virtual asset service provider deposits a user’s deposit with or entrusts the same to a custodian pursuant to paragraph (1), the service provider shall clearly indicate that the deposit is the property of the user. |
| (3) | No person shall offset or attach (or provisionally attach) funds deposited with or entrusted to a custodian under paragraph (1), and no virtual asset service provider shall transfer these deposited or entrusted funds or offer them as collateral, except in cases prescribed by Presidential Decree. |
| (4) | If a virtual asset service provider falls under any of the following, a custodian shall give priority to disbursing the deposited or entrusted funds to the users upon their request in accordance with the methods and procedures prescribed by Presidential Decree: |
| 1. | Where the virtual asset service provider’s reported status as a virtual asset service provider is canceled; |
| 2. | Where a resolution for dissolution or merger has been adopted; |
| 3. | Where the virtual asset service provider is declared bankrupt. |
| Article 7 (Safekeeping of Virtual Assets) |
| (1) | If a virtual asset service provider is entrusted with the safekeeping of virtual assets by a user, it shall create and maintain a user list containing the following: |
| 1. | The address and name of the user; |
| 2. | The type and quantity of virtual assets entrusted by the user; |
| 3. | The virtual asset address of the user (referring to electronically generated unique identification numbers designed to manage the transmission records and storage details of virtual assets). |
| (2) | Virtual asset service providers shall keep the virtual assets of users separate from their own virtual assets, and shall ensure that they in effect possess the types and quantities of virtual assets entrusted by the users. |
| (3) | Virtual asset service providers shall maintain at least a certain portion of users’ virtual assets held under paragraph (1) offline as prescribed by Presidential Decree, and store them securely. |
| (4) | Virtual asset service providers may entrust an institution meeting the security standards prescribed by Presidential Decree with the safekeeping of users’ virtual assets. |
| Article 8 (Enrollment in Insurance Programs) |
Virtual asset service providers shall take necessary measures such as enrolling in insurance or mutual aid programs or accumulating reserves in accordance with the guidelines determined and publicly notified by the Financial Services Commission to fulfill their liabilities or obligations in the event of accidents prescribed by Presidential Decree, such as hacking and computer failures.
| Article 9 (Creation, Retention, and Destruction of Transaction Records) |
| (1) | Virtual asset service providers shall retain records of transactions that allow for the tracking and retrieval of details regarding trading and other virtual asset transactions and for the verification or correction of any discrepancies, if any, in such details (hereinafter referred to as "virtual asset transaction records") for 15 years from the time the relevant transactional relationship is terminated. |
| (2) | The types of virtual asset transaction records to be retained by virtual asset service providers, the methods of storing these records, the procedures and methods for destroying them, and other related matters shall be prescribed by Presidential Decree. |
CHAPTER III REGULATION OF UNFAIR TRADE
| Article 10 (Prohibition of Unfair Trade Practices) |
| (1) | None of the following persons shall use any material non-public information relating to virtual assets (information that may significantly affect users' investment decisions and has not been disclosed to many, unspecified persons through methods prescribed by Presidential Decree; hereinafter the same shall apply) for trading in the relevant virtual assets or engaging in other transactions or allow other persons to use such information: |
| 1. | Virtual asset service providers, persons issuing virtual assets (including corporations; hereafter in this Article the same shall apply), their executive officers, employees, or agents, who become aware of the material non-public information in connection with their duties; |
| 2. | If persons referred to in subparagraph 1 are corporations, any major shareholders (referring to major shareholders defined in subparagraph 6 (b) of Article 2 of the Act on Corporate Governance of Financial Companies; in such cases, "financial company" shall be construed as "corporation"), who become aware of the material non-public information while exercising their rights; |
| 3. | Persons having, among other things, authority to grant permissions, authorizations, instructions, or supervision to virtual asset service providers or to those issuing virtual assets under relevant statutes or regulations, who become aware of the material non-public information while exercising such authority; |
| 4. | Persons who are in the process of entering into or negotiating a contract with either virtual asset service providers or persons issuing virtual assets, who become aware of the material non-public information in the course of entering into, negotiating, or performing such contract; |
| 5. | Agents (including executive officers, employees, or agents if the person in question is a corporation), employees, or other employees (or an executive officer, employee, or agent of a corporation if the person falling under any of subparagraphs 2 through 4 is the corporation), who become aware of the material non-public information in connection with their duties; |
| 6. | Persons who receive the material non-public information from a person falling under any of subparagraphs 1 through 5 (including a person in whose case one year has not passed since the day he or she ceased to fall under any of subparagraphs 1 through 5); |
| 7. | Other persons equivalent to those prescribed in the above-listed subparagraphs, that are prescribed by Presidential Decree. |
| (2) | No one shall engage in any of the following acts with the intent to mislead others into believing virtual assets are actively traded or otherwise cause others to make a wrong judgement: |
| 1. | Conspiring with other persons to buy virtual assets at the same price as his or her sale price, or at the same time he or she sells them; |
| 2. | Conspiring with other persons to sell virtual assets at the same price as his or her purchase price and at the same time he or she sells them; |
| 3. | Engaging in false trading of virtual assets with no intent to transfer the right thereto; |
| 4. | Entrusting or being entrusted with any act under subparagraphs 1 through 3. |
| (3) | No person shall mislead anyone into believing that virtual assets are actively traded or engage in trading, entrust, or be entrusted to manipulate or fix the market prices thereof with the intent to encourage the trading of virtual assets. |
| (4) | No person shall engage in the following acts related to the trading or other transactions of virtual assets: |
| 1. | Employing improper means, schemes, or tricks; |
| 2. | Making false statements or misrepresentations of material facts, or using either documents with no statement or representation of material facts necessary to prevent misunderstanding for others or any other statement or representation in an attempt to earn money or any interest in property; |
| 3. | Using false market prices with the intent to encourage the trading and other transactions of virtual assets; |
| 4. | Entrusting or being entrusted with any act under subparagraphs 1 through 3. |
| (5) | No virtual asset service provider shall trade or engage in other transactions of virtual assets issued by itself or by a person in a special relationship prescribed by Presidential Decree (hereinafter referred to as "related person"), except in any of the following cases: |
| 1. | Where the virtual assets are issued as a means of payment for specific goods or services, and a virtual asset service provider provides the certain goods or services as promised to the users, and acquires the virtual assets in return; |
| 2. | Where a virtual asset service provider is forced to acquire the virtual assets due to their characteristics and complies with the procedures and methods prescribed by Presidential Decree to prevent unfair trade practices or conflict of interests with users. |
| (6) | A person violating paragraphs (1) through (5) shall be liable for damages suffered by a user due to the violation in connection with the trading and other transactions of the virtual assets. |
| Article 11 (Prohibition of Discretionary Blocking of Deposits or Withdrawals of Virtual Assets) |
| (1) | No virtual asset service provider shall block a user’s deposits or withdrawals of virtual assets without good cause prescribed by Presidential Decree. |
| (2) | In cases where a virtual asset service provider blocks a user’s deposits or withdrawals of virtual assets, the virtual asset service provider shall provide advance notice to the user clearly stating the reason for such actions, and immediately report such fact to the Financial Services Commission. |
| (3) | A person violating paragraph (1) shall be liable for damages suffered by those who engaged in a transaction involving virtual assets, or entrusted such transactions, which occurred at a price influenced by the violation. |
| (4) | The right to claim damages under paragraph (3) expires through prescription, if the claimant fails to exercise this right within the two years from the moment he or she becomes aware of the violation of paragraph (1), or within five years from the time such act was committed. |
| Article 12 (Monitoring of Abnormal Transactions) |
| (1) | Virtual asset service providers that establish and operate virtual asset markets shall continuously monitor abnormal transactions prescribed by Presidential Decree (hereinafter referred to as “abnormal transactions”), which include instances of unusual fluctuations in the prices or trading volumes of virtual assets, and shall take appropriate measures to protect users and to maintain sound trading practices as determined by the Financial Services Commission. |
| (2) | If virtual asset service providers prescribed in paragraph (1) suspect a violation of Article 10 while performing the duties prescribed in paragraph (1), they shall without delay notify the Financial Services Commission and the Governor of the Financial Supervisory Service (referring to the Governor of the Financial Supervisory Service established pursuant to Article 24 (1) of the Act on the Establishment of Financial Services Commission; hereinafter the same shall apply) of these suspicions: Provided, That in cases determined and publicly notified by the Financial Services Commission, such as where the suspected violation of Article 10 is amply substantiated, the service providers shall report such violation to an investigative agency without delay and subsequently report such fact to the Financial Services Commission and the Governor of the Financial Supervisory Service. |
CHAPTER IV SUPERVISION AND DISPOSITIONS
| Article 13 (Supervision and Inspection of Virtual Asset Service Providers) |
| (1) | The Financial Services Commission may supervise whether virtual asset service providers properly comply with this Act or any orders or dispositions issued or made under this Act and may inspect their business affairs and financial status. |
| (2) | If necessary to protect users and to maintain sound trading practices, the Financial Services Commission may issue orders to virtual asset service providers or any interested parties prescribed by Presidential Decree to take necessary measures regarding the following: |
| 1. | Submission of data to verify proper compliance with this Act, or any orders or dispositions issued or made under this Act; |
| 2. | Management of inherent property; |
| 3. | Safekeeping and administration of users’ assets; |
| 4. | Maintenance of order in trading practices; |
| 6. | Protection of users in the event of business suspensions, such as dissolution resolutions or declarations of bankruptcy; |
| 7. | Other matters prescribed by Presidential Decree, which are necessary to protect users and to maintain sound trading practices. |
| (3) | The Governor of the Financial Supervisory Service may, if deemed necessary for conducting an inspection under paragraph (1), request a virtual asset service provider to submit reports on its business affairs or property or other data, attend as a witness, provide testimony, or state an opinion. |
| (4) | A person who conducts an inspection under paragraph (1) shall carry identification verifying his or her authority and present it to relevant persons. |
| (5) | The Financial Services Commission may determine and publicly notify the methods and procedures for conducting inspections, the guidelines for measures to be taken based on the inspection findings, and other matters necessary for the inspection. |
| Article 14 (Investigation of and Measures in Response to Unfair Trade Practices) |
| (1) | In the event of a violation of this Act or any orders or dispositions issued or made under this Act, or if deemed necessary for the protection of users or for the promotion of sound trading practices, the Financial Services Commission may issue orders requiring those suspected of committing the violation or any other relevant persons to submit reports or relevant data for reference, or may have the Governor of the Financial Supervisory Service investigate books, documents, and other things. |
| (2) | As part of an investigation under paragraph (1), the Financial Services Commission may request the suspected violator and other relevant persons to perform the following acts: |
| 1. | Submit statements regarding the facts and status of the matters under investigation; |
| 2. | Appear to make a statement regarding the matters under investigation; |
| 3. | Submit books, documents, and other things necessary for the investigation. |
| (3) | During an investigation under paragraph (1), the Financial Services Commission may take the following measures if deemed necessary for investigating a violation of Article 10: |
| 1. | Taking custody of books, documents, and other things submitted under paragraph (2) 3; |
| 2. | Investigating the business affairs, books, documents, and other things by entering the relevant person’s office or place of business. |
| (4) | During an investigation under paragraph (1), the Financial Services Commission may, if deemed necessary, request virtual asset service providers to submit data necessary for the investigation in accordance with the method prescribed by Presidential Decree. |
| (5) | A person who conducts an investigation under paragraph (3) 2 shall carry identification verifying his or her authority and present it to relevant persons. |
| (6) | The Financial Services Commission may publish the results of investigations into relevant persons, details of measures taken based on the findings, and other information and data necessary to prevent such persons from committing violations, in accordance with the method prescribed by Presidential Decree. |
| (7) | If the Governor of the Financial Supervisory Services conducts an investigation under paragraph (1), he or she shall report the results of such investigation to the Financial Services Commission. |
| Article 15 (Measures against Virtual Asset Service Providers) |
| (1) | If the Financial Services Commission identifies a violation of this Act or an orders or dispositions under this Act by either a virtual asset service provider or any interested party prescribed by Presidential Decree, it may take any of the following measures: |
| 1. | Issue an order to correct the relevant violation; |
| 4. | Suspend all or part of business operations; |
| 5. | Notify or file an accusation with an investigative agency. |
| (2) | If the Financial Services Commission finds that an executive officer or employee of a virtual asset service provider has violated this Act or an order or disposition under this Act, it may take the following measures against the executive officer or the employee involved in the violation: |
| 1. | Recommend the dismissal of the executive officer or suspend his or her duties for up to six months; |
| 2. | Request the removal of the employee or his or her suspension from office; |
| 3. | Request the issuance of a caution, warning or reprimand to the executive officer or the employee. |
| (3) | If the Financial Services Commission intends to make a disposition of any recommendation for dismissal or request for removal under paragraph (2), it shall hold a hearing. |
| Article 16 (Requests for Submission of Data by the Bank of Korea) |
If deemed necessary by the Monetary Policy Committee to implement monetary and credit policies and to facilitate the smooth operation of payment and settlement systems in relation to virtual asset transactions, the Bank of Korea may request a virtual asset service provider to submit data. In such cases, the data requested shall be limited to a minimum extent necessary, fully taking into account the workload of the relevant virtual asset service provider.
| Article 17 (Penalty Surcharges for Unfair Trade Practices) |
| (1) | The Financial Services Commission may impose a penalty surcharge on a person who violates Article 10 (1) through (4) up to twice the profit gained (including unrealized gains; hereafter in this Article the same shall apply) from or loss avoided through the violation: Provided, That a penalty surcharge of up to four billion won may be imposed where there is no profit gained or loss avoided through the transaction related to the violation or where it is impracticable to assess such amount. |
| (2) | If the Financial Service Commission imposes a penalty surcharge in accordance with paragraph (1) for the same violation for which a fine is imposed pursuant to Article 19, it may revoke the imposition of the penalty surcharge under paragraph (1) or deduct all or some of the amount equivalent to the fine (in the case of a confiscation or collection, the relevant amount shall be included) from the penalty surcharge. |
| (3) | Upon the request of the Financial Services Commission for the provision of investigation-related data for the imposition of a penalty surcharge under paragraph (1), the Prosecutor General may provide such data to the extent deemed necessary. |
| (4) | Articles 431 through 434 and 434-2 through 434-4 of the Financial Investment Services and Capital Markets Act shall apply mutatis mutandis to the submission of opinions on, and filing of objections to, the imposition of penalty surcharges, the extension of a deadline for the payment of penalty surcharges, the payment of such charges in installments, the collection of penalty surcharges and dispositions on default, the refund of overpayments or erroneous payments, additional payment upon refund of penalty surcharges, and disposition on deficits. |
| (5) | Except as provided in paragraphs (1) through (4), matters necessary for the procedures and standards for imposing penalty surcharges shall be prescribed by Presidential Decree. |
| Article 18 (Entrustment of Authority) |
The Financial Services Commission may entrust part of its business affairs under this Act to the Governor of the Financial Supervisory Service, as prescribed by Presidential Decree.
CHAPTER V PENALTY PROVISIONS
| Article 19 (Penalty Provisions) |
| (1) | Any of the following persons shall be punished by imprisonment with labor for a limited term of at least one year or by a fine equivalent to at least three times but not more than five times the profit gained or the loss avoided as a result of the violation: Provided, That the maximum fine shall be 500 million won if such person has neither gained profit nor avoided loss due to the violation; if it is impracticable to calculate such profit or loss; or if the amount equivalent to five times the profit gained or the loss avoided through the violation does not exceed 500 million won: |
| 1. | A person who uses material non-public information related to virtual assets for trading in such assets and engaging in other transactions or allows other persons to use it, in violation of Article 10 (1); |
| 2. | A person who engages in any of the following acts referred to in any subparagraph of Article 10 (2) with the intent to mislead other persons into believing that virtual assets are actively traded or otherwise cause others to make a wrong judgement, in violation of that paragraph; |
| 3. | A person who misleads anyone into believing that virtual assets are actively traded or engages in trading, entrusts, or is entrusted to manipulate or fix the market prices of those assets with the intent to encourage the trading of virtual assets, in violation of Article 10 (3); |
| 4. | A person who engages in acts referred to in any subparagraph of Article 10 (4) regarding the trading of virtual assets and other transactions. |
| (2) | Any of the following persons who engaged in the trading or other transactions of virtual assets issued by himself or herself or a related person, in violation of Article 10 (5), shall be punished by imprisonment with labor for a limited term of up to 10 years or by a fine equivalent to at least two times but not more than five times the profit gained or the loss avoided due to the violation: Provided, That the maximum fine shall be 500 million won if such person has neither gained profit nor avoided loss due to the violation; if it is impracticable to calculate such profit or loss; or if the amount equivalent to five times the profit gained or the loss avoided through the violation does not exceed 500 million won. |
| (3) | If the profit gained or loss avoided as a result of the violation under paragraph (1) exceeds 500 million won, imprisonment with labor under paragraph (1) shall be aggravated as follows: |
| 1. | If the profit gained or loss avoided is at least five billion won: Imprisonment with labor for an indefinite term or for at least five years; |
| 2. | If the profit gained or loss avoided is at least 500 million won, but less than five billion won: Imprisonment with labor for a limited term of at least three years. |
| (4) | If the profit gained or loss avoided as a result of the violation under paragraph (1) exceeds 500 million won, imprisonment with labor under paragraph (2) shall be aggravated as follows: |
| 1. | If the profit gained or loss avoided is at least five billion won: Imprisonment with labor for a limited term of at least three years; |
| 2. | If the profit gained or loss avoided is at least 500 million won, but less than five billion won: Imprisonment with labor for a limited term of at least two years. |
| (5) | If imprisonment with labor is imposed under paragraphs (1) through (4), the suspension of qualification and a fine may be imposed concurrently. |
| (6) | The profit (including unrealized profit) obtained or loss avoided as a result of the violation referred to in paragraphs (1) and (2) means the difference calculated by deducting the total transaction costs from the total income earned from the transaction conducted in violation of these provisions. In such cases, detailed calculation methods for each type of violation shall be prescribed by Presidential Decree. |
| Article 20 (Confiscation and Collection) |
| (1) | The property acquired by a person falling under any subparagraph of Article 19 (1) or under paragraph (2) as a result of engaging in a relevant act shall be subject to confiscation, and if confiscation of such property is impracticable, the value thereof shall be collected. |
| (2) | The property that a person falling under any subparagraph of Article 19 (1) 2 through 4 or under paragraph (2) has provided, or intends to provide, for a relevant act shall be subject to confiscation, and if confiscation of such property is impracticable, the value thereof shall be collected. |
| Article 21 (Joint Penalty Provisions) |
If the representative of a corporation (including organizations; hereafter in this Article the same shall apply) or an agent or employee of, or any other person employed by, the corporation or an individual commits any violations under Article 41 in conducting the business affairs of the corporation or individual, the corporation or individual shall be punished by a fine prescribed in the relevant provisions in addition to punishing the violators accordingly: Provided, That this shall not apply where such corporation or individual has not been negligent in exercising reasonable care and supervision regarding the relevant business affairs in order to prevent such violation.
| Article 22 (Administrative Fines) |
| (1) | Any of the following persons shall be subject to an administrative fine not exceeding 100 million won: |
| 1. | A person who fails to lawfully manage users’ deposits, in violation of Article 6; |
| 2. | A person who fails to lawfully safekeep users’ virtual assets, in violation of Article 7; |
| 3. | A person who fails to take necessary measures such as enrolling in an insurance or mutual aid program or accumulating reserves, in violation of Article 8; |
| 4. | A person who fails to create, retain, or destroy virtual asset transaction records, in violation of Article 9; |
| 5. | A person who fails to file a report under Article 11 (2) or files a false report; |
| 6. | A person who fails to take appropriate measures for abnormal transactions, in violation of Article 12 (1); |
| 7. | A person who fails to notify or report under Article 12 (2) or provides false reports or notifications; |
| 8. | A person who fails to comply with an inspection, investigation, order, or request under Articles 13 through 15, or refuses, obstructs, or evades the same. |
| (2) | The Financial Services Commission shall impose and collect administrative fines under paragraph (1) in accordance with the methods and procedures prescribed by Presidential Decree. |
ADDENDA <Act No. 19563, Jul. 18, 2023>
Article 1 (Enforcement Date)
This Act shall enter into force one year after the date of its promulgation: Provided, That Article 2 (6) of the Addenda shall enter into force on January 1, 2025. Article 2 Omitted.