South Korea’s digital asset bill seeks to establish a framework for penalties and liability for damages stemming from inequitable cryptocurrency trading practices.

South Korea’s government is taking preventative measures against catastrophes akin to Do Kwon’s Terra ecosystem with the implementation of a fresh digital asset bill.

The National Assembly gave the green light to the Digital Asset User Protection legislation on June 30. The bill has been designed to govern unjust trade practices and safeguard crypto investors, according to local news outlet SBS Biz.

The law reportedly combines 19 cryptocurrency-related bills into a consolidated act that defines digital assets and stipulates penalties for illicit trading actions such as the utilization of non-disclosed information, market manipulation, and other unethical cryptocurrency trading practices.

As per local news sources, the focal point of the Digital Asset User Protection Act is to initially apply the Capital Market Act to digital assets possessing a securities nature. The law also seeks to create a foundation for setting penalties and liabilities for damages incurred by unfair crypto trading practices.

To ensure investor safety, Virtual Asset Service Providers (VASPs) in South Korea are now allegedly obligated to assume responsibility for user deposits and offer insurance. Such provisions are critical for user protection against risks such as hacks and computer failures.

According to the SBS Biz coverage, non-compliance with the new regulations could lead to imprisonment for at least one year or substantial fines. For instance, the Financial Services Commission can levy a penalty equivalent to double the amount of profits derived from unfair trade.

This development follows closely after Terraform Labs’ founder, Do Kwon, received a four-month prison sentence from a Montenegrin court for using a forged passport. The executive also has an arrest warrant in his name in South Korea on charges of contravening the nation’s capital market law.

South Korean prosecutors recently labeled Terra’s token collapse as the most substantial financial fraud or financial securities fraud case in the country’s history.