Key Insights
- South Korea unveils strict punishments including potential life sentences under new crypto rules
- Financial regulators say those making over $3.8 million from illegal acts face jail or fines worth double proceeds
- New law also requires exchanges store 80% assets in cold wallets and enroll in insurance programs
SEOUL (MarketsXplora) – South Korea said on Wednesday cryptocurrency offenders could face fines of up to 5 billion won ($3.8 million) or life in prison under incoming rules that experts describe as extreme compared to other centers.
The new Cryptocurrency User Protection Act, taking effect in July, is designed to eradicate illegal behavior seen as rampant in the digital asset market like insider trading, market manipulation, and fraudulent transactions.
Violations will be punishable by at least a year in prison or three times the profits from illegal acts under the rules published by the Financial Services Commission (FSC) on Wednesday.
But crypto criminals making over 5 billion won from illicit behavior face lifetime jail sentences or penalties worth double their profits, highlighting the strict stance of South Korean regulators.
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The severe punitive measures, which also require crypto exchanges to keep over 80% of assets in cold storage wallets for customer protection, exceed regulations in major centers like the United States.
Last July, South Korea’s parliament passed bills for the act despite industry objections over stringent requirements around capital reserves and insurance, as the country emerges as a hotspot for crypto and blockchain startups.
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Regulators say the crackdown is warranted given cryptocurrencies like Bitcoin remain extremely volatile compared to traditional assets, exposing traders to higher risks the authorities should limit.
Neighboring Japan this year implemented jail terms of up to one year for certain crypto violations – far shorter than the maximum life sentence faced in South Korea.