Compensation for compensation to virtual assets when financial authorities block arbitrary deposits and withdrawals

Surprised by the bankruptcy of FTX, the financial authorities expressed their willingness to accept a bill that enforces compensation if there were to be compensation for users of virtual assets due to the arbitrary blocking of deposits and withdrawals by digital asset operators.

According to data presented by the Financial Services Commission to the National Assembly’s Political Affairs Committee on the 21st, the Financial Services Commission generally accepted the ‘legal bill for restoring fairness in the digital asset market and creating a safe trading environment’ proposed by Representative Yoon Chang-hyun, the power of the people.

This bill includes the content of separating the deposits of users of digital assets from their own property and trust, and creating an inventory of users’ digital assets.

There is also a clause that sets out insurance purchases in preparation for compensation for accidents such as hacking and computer failure, restricts transactions in self-declared digital assets with a high risk of unfair trading, and imposes liability for compensation in case of the ban is broken. on arbitrary deposits and withdrawals of digital assets.

The bill also includes content that supervises and audits digital asset operators, orders corrections in case of violation of the law, or charges the investigative agency, and delegates authority to the Committee Digital Assets to conduct investigations and impose fines.

It also includes giving Financial Services Commission officers investigating digital assets the authority to enquire, seize, and search for unfair trade investigations, and impose criminal penalties and fines for breaking the law.

The Financial Services Commission agreed with this bill that it is necessary to prevent virtual asset operators from blocking user deposits and making arbitrary withdrawals in terms of protecting user assets.

The Financial Services Commission showed a stance of acceptance although the user must compensate if the user suffers losses in virtual asset trading due to the price formed due to the arbitrary blocking of deposits and withdrawals. The Financial Services Commission interpreted that “the liability for damages is recognized as a sanction for breaching the prohibition regulations.”

(Photo = Reuters = Yonhap News)

(Photo = Reuters = Yonhap News)

The Financial Services Commission also agreed to add a fine to digital asset operators who breach their reporting obligations in relation to the ban on arbitrary deposits and withdrawals.

It was agreed that the Financial Services Commission’s authority would be delegated when the Digital Assets Committee was established, and the Financial Services Commission expressed its intention to accept the provision allowing seizure and search for unfair trade investigations, assuming agreement with the relevant ministries.

However, the Financial Services Commission said it would take at least six months to prepare sub-regulations, and that it was practically difficult to shorten the implementation period from one year to six months after promulgation of the law.

As a preparatory step for step-by-step legislation related to digital assets, the Financial Services Commission intends to prepare a regulatory system for stablecoins and digital asset evaluation business and present them to the Political Affairs Committee before the next year’s regular National Assembly.

Kim Gap-rae, director of the Financial Consumer Protection Research Center at the Capital Market Institute, said, “In terms of investor protection, regulatory addition is slow.”

On the 11th (local time), the virtual currency exchange FTX, which was in a liquidity crisis due to large-scale withdrawals, filed for bankruptcy protection under Article 11 (Chapter 11) of the Bankruptcy Act with a Court State of Delaware in the United States. With up to 66 trillion won in corporate debt, FTX’s bankruptcy filing is the largest in the history of the cryptocurrency industry.

According to the bankruptcy filing, FTX’s liabilities range from 10 billion to 50 billion dollars (13.2 trillion to 66.2 trillion won), and its assets are the same size as its liabilities. There are over 100,000 creditors.

Cha Eun-ji, reporter [email protected]

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