The full text of South Korea's first independent "encryption bill": insider trading can be sentenced to life imprisonment

On June 30, 2023, the Political Affairs Committee of the National Assembly of South Korea passed the country’s first legislation on virtual assets——"Virtual Asset User Protection Act (가상자산이용자보호등에관한법률안)", which aims to protect virtual asset users and limit illegal assets. Fair trading will come into effect one year after promulgation (expected to be implemented in July 2024). The text of the "Law on the Protection of Virtual Asset Users" has 20 pages and 22 articles. The complete bill is translated as follows.

Compile: WEEX

Bill Highlights:

A. The purpose of this law is to protect the rights and interests of virtual asset users and establish a sound trading order in the virtual asset market (Article 1).

B. The definition of virtual assets refers to the existing definition of virtual assets in the Specified Financial Transaction Information Reporting and Utilization Act, but excludes the electronic money and related services issued by the Bank of Korea from the scope of virtual assets, and provides for virtual assets. The operator defines the virtual asset market (Article 2).

C. Provisions that acts affecting Korea, even if implemented abroad, shall be subject to the provisions of this Act, and virtual assets and virtual asset operators shall be subject to the provisions of this Act, unless otherwise provided by other laws (Articles 3 and 4 ).

D. The Financial Services Commission may establish and operate a virtual asset-related committee to advise on the policies and regulations of the virtual asset market and virtual asset operators (Article 5).

E. In order to protect the assets of virtual asset users, the law regulates matters related to the protection of deposits, storage of virtual assets, insurance, and establishment and preservation of virtual asset transaction records (Articles 6 to 9).

F. Using undisclosed material information, manipulating market prices, and fraudulent trading behaviors are defined as unfair trading behaviors in box trading. If there is any violation, it shall be liable for compensation for losses and may be fined (**Article 10 Article and Article 17, **WEEX Note: This is the focus of the entire bill).

G. It is prohibited to arbitrarily block users’ access to virtual assets, and requires virtual currency exchange operators to monitor abnormal transactions in the virtual asset market at any time, take appropriate measures, and notify financial authorities (articles 1 and 12, Note from WEEX: Operating institutions are not allowed to restrict user deposits, withdrawals and transactions at will, and report any abnormality to the regulatory agency).

H. It stipulates the supervision and inspection of virtual asset operators by financial authorities, as well as the power to investigate unfair trade practices (Articles 13 to 15).

I. Allow central banks to require submissions from virtual asset operators when necessary for the implementation of monetary and credit policies, financial stability, and the smooth functioning of payment and settlement systems (Article 16).

J. Provides for matters related to penalties and aggravated penalties for those who engage in unfair trade practices, allows for the combination of disqualification and fines in the case of imprisonment, and provides for matters related to confiscation and the provision of mitigation (Articles 19 to 21) .

K. A fine not exceeding 100 million won shall be imposed on any person who violates the obligations stipulated in this Act, except for unfair trade practices (Article 22).

Virtual Asset User Protection Act

Chapter 1 Overview

Article 1 (Purpose) This law aims to protect the rights and interests of virtual asset users, and to establish a transparent and sound environment in the virtual asset market by formulating matters related to the protection of virtual asset users' assets and regulating unfair trading activities. transaction order.

Article 2 (Definitions) The following terms used in this Act have the following meanings.

**1. "Virtual Asset" means an electronic representation (including any rights therein) that has economic value and can be traded or transferred electronically. **However, it does not include anything that falls under any of the following headings:

A. Electronic certificates that cannot be exchanged for money, goods, services, etc., or information about such certificates, the use of which has been restricted by the issuer

B. Tangible and intangible results obtained by using game materials in accordance with Article 32, Paragraph 1, Item 7 of the Game Industry Promotion Act

C. Prepaid electronic payment instruments under Clause 14 of Article 2 of the Electronic Financial Transactions Act and electronic money specified in Clause 15 of the same Article

D. Shares registered electronically under Section 2(4) of the Electronic Registration of Stocks, Bonds, etc. Act

E. Pursuant to Section 2(2) of the Electronic Money Orders Issuance and Distribution Act, an electronic money order

F. Pursuant to Section 862 of the Commercial Code, electronic bills of lading

G. Forms of electronic money issued by the Bank of Korea under the Bank of Korea Act and services related thereto

H. Will be determined by Presidential Decree depending on the form and nature of the transaction

2. "Virtual asset business" means a person who engages in any of the following acts related to virtual assets:

A. Acts of selling and buying virtual assets (hereinafter referred to as "sales")

B. The act of exchanging virtual assets for other virtual assets

C. Acts of transferring virtual assets in accordance with Presidential Decree

D. The act of storing or managing virtual assets

E. Acts that intermediary, arrange, or represent any of the acts listed in A and B

**3. "User" means a person who buys, sells, exchanges, transfers or stores and manages virtual assets through a virtual asset business. **

4. "Virtual asset market" refers to a market where virtual assets can be bought and sold or exchanged between virtual assets.

Article 3 (Applicability to foreign acts) This Act shall also apply to acts committed abroad that have an effect in Korea.

Article 4 (Relationship with other laws) Unless otherwise specified by other laws, virtual assets and virtual asset operators shall be governed by this Act.

Article 5 (Establishment of the Virtual Assets Committee)① The Financial Services Committee may establish and operate the Virtual Assets Committee to advise on matters related to the policies and systems of the virtual asset market and virtual asset business stipulated in this Act or other laws and regulations .

② Necessary matters concerning the composition and operation of the committee prescribed in paragraph (1) shall be prescribed by Presidential Decree.

Chapter Two Protecting User Assets

**Article 6 (Protection of Deposits) ① Virtual asset business operators shall separate users’ deposits (referring to funds deposited by users for buying and selling virtual assets, intermediary buying and selling, and other business activities) from their own assets, and in accordance with Deposit or entrust it with an authoritative institution (hereinafter referred to as "management institution"), such as a bank stipulated in the Banking Act, by the method prescribed by Presidential Decree. **

WEEX Note: This article emphasizes that virtual asset management institutions separate their own assets from customer deposits, which is the most basic "asset segregation principle" recognized around the world.

Judicial cases: In June 2023, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against the Binance Exchange, including as many as 13 charges: Binance and its U.S. affiliates will exceed $12 billion in client assets transferred to entities controlled by Binance founder Changpeng Zhao (CZ), which included mixing client and company funds in accounts at Merit Peak, a trading firm owned by Changpeng Zhao; Ann had “significant deficiencies” in operating the BINANCE.US platform and controlling the custody of client assets, including mixing client and company funds, reliance on the parent company for financial data, and a lack of disaster planning.

② When the user's deposit is deposited or entrusted to the management institution under paragraph ①, the virtual asset business shall disclose the meaning that the deposit is the user's property.

③ No one may set off or seize the deposits deposited or entrusted with the management institution under subparagraph ①, and the virtual asset business institution that deposits or escrows the deposits shall not transfer or provide guarantees for the deposits deposited or entrusted with the management institution, unless stipulated by Presidential Decree.

④ If the virtual asset business operator falls under any of the following items, the management agency shall, at the request of the user, pay the deposit deposited or in custody to the user in accordance with the method and procedure prescribed by Presidential Decree:

1. Business registration canceled

2. In case of dissolution or merger resolution

3. In the event of a declaration of bankruptcy

**Article 7 (Storage of Virtual Assets)**① If a virtual asset enterprise is entrusted by a user to store virtual assets, it shall establish and keep a user register containing the following items:

1. User's address and name

2. Types and quantities of virtual assets entrusted by users

3. User's virtual asset address (referring to an electronically generated unique identification number for managing the transmission and storage history of virtual assets)

**② The virtual asset management institution shall keep its own virtual assets separately from those of users, and actually hold virtual assets of the same type and quantity as those entrusted by users. **

③ The virtual asset operator shall securely store the virtual assets stored by users in accordance with the provisions of paragraph ① separately from the Internet at the ratio prescribed by Presidential Decree.

④ The virtual asset management organization may entrust the user's virtual assets to an organization that meets the security standards stipulated by the Presidential Decree and store them.

Article 8 (Acquisition of Insurance, etc.) In order to fulfill its responsibilities in the event of an accident prescribed by Presidential Decree, such as a hacker attack or computer failure, the virtual asset business operator shall take necessary measures, such as in accordance with the provisions of the Financial Services Commission The standard is to obtain insurance or deductibles or accumulate reserves (for example, WEEX Exchange established a 1000 BTC investor protection fund).

Article 9 (Establishment, Preservation and Destruction of Transaction Records) ①Virtual asset management institutions shall keep records of virtual asset transactions that can be tracked and queried, or confirm and correct transaction contents within 15 years from the date of the end of the transaction relationship Incorrect records (hereinafter referred to as "virtual asset transaction records").

②The presidential decree shall specify the types, storage methods, destruction procedures and methods, etc., of virtual asset transaction records that virtual asset companies shall keep.

Chapter III Supervision of Unfair Trade

Article 10 (Prohibition of unfair transactions, etc.) ① Persons belonging to the following items shall not use undisclosed virtual asset material information (referring to unspecified persons that may Information that has a significant impact on the user's investment judgment), shall not be used for the purchase, sale or other transactions of such virtual assets, nor may it be used by others.

1. Virtual asset companies, virtual asset issuers (including legal entities, hereinafter simply "legal entities"), and their employees and agents are aware of undisclosed material information when performing their duties

2. A legal entity is in the process of exercising its rights as a major shareholder (a major shareholder under Article 2, Paragraph 6 of the Financial Company Governance Act, in which case a "financial company" shall be deemed a "legal entity") learned of undisclosed material information

3. Be aware of undisclosed material information in the process of exercising its rights

4. Persons who have permission, authorization, guidance, supervision or other powers to virtual asset companies or virtual asset issuers in accordance with laws and regulations, and are aware of undisclosed material information in the process of exercising such powers; have or are working with virtual asset companies or The virtual asset issuer signs a contract and is aware of undisclosed material information during the process of signing, negotiating or performing the contract

5. Agents (including employees and agents thereof, if the person is a company), users or any other employees (including employees and agents thereof, if falling under paragraphs 2 to 4) of persons falling under paragraphs 2 to 4 the person making the payment is a company) in the performance of its duties became aware of undisclosed material information

6. A person who has received undisclosed material information from a person falling under any of paragraphs 1 to 5 (including a person who has not been within one year from the date of ceasing to fall under any of paragraphs 1 to 5) people)

7. Any other person designated by Presidential Decree

WEEX Note: Paragraphs 1-6 define "insider information", which can refer to the definition of traditional finance: insider information refers to a company or organization that has mastered undisclosed information and conducts transactions based on this information individual or entity. Such inside information may include the company's important financial data, undisclosed business decisions, merger and acquisition plans, major contracts, product innovations and other important information related to the company. A person with inside information can be a company's senior management, directors, employees, partners or other people who have close ties to the company.

② No one may engage in the following acts in order to mislead others about the prosperity of buying and selling virtual assets, or otherwise cause others to make wrong judgments:

1. Arrange with the parties in advance to buy and sell virtual assets at the same price as the sale

2. Arrange with the parties in advance to buy and sell the virtual assets at the same price at the same time as the purchase

3. Carry out false transactions not for the purpose of transferring virtual asset trading rights

WEEX Note: The first two items prohibit insiders from using the insider information they have to trade for profit, that is, the behavior of "rat warehouse"; the third item prohibits the behavior of "swiping orders".

Judicial case: The above-mentioned SEC’s allegations against Binance Exchange include: accusing Binance of carrying out wash trading on its US platform, which usually leads to inflated trading volume and creates the illusion of market interests. Most of these transactions were allegedly conducted through accounts linked to Sigma Chain, which is owned and controlled by Changpeng Zhao. That is, the behavior of "swiping orders" prohibited in Article 3 above.

4. Entrusting or acting on behalf of the acts mentioned in paragraphs 1 to 3

③ No one shall falsely make the trading of virtual assets appear to be booming, or engage in the trading of fluctuating or fixed virtual asset market prices, or entrust or consignment behavior in order to attract trading of virtual assets.

④ No one shall engage in any of the following acts related to purchase, sale or other virtual asset transactions:

1. Use of fraudulent means, schemes or techniques

2. Making false statements or representations about material matters, or using documents or other statements or representations that omit necessary material facts, so that the statements or representations will not mislead others in order to obtain economic or other property benefits

3. Using false market prices to induce the purchase or sale of virtual assets or other transactions

4. Entrusting or entrusting to perform the acts described in items 1 to 3

⑤ Virtual asset companies are not allowed to engage in the sale, purchase or other transactions of virtual assets issued by themselves or persons with special relationships stipulated by Presidential Decree (hereinafter referred to as "related parties") (WEEX Note: "related transactions"), Unless it falls into any of the following categories:

1. It is a virtual asset issued as a means of payment for specific goods or services. Virtual asset operators provide specific goods and services promised to users and obtain virtual assets in return

2. When the virtual asset provider inevitably acquires virtual assets due to the characteristics of virtual assets, and follows the procedures and methods prescribed by Presidential Decree to prevent unfair trade practices or conflicts with users’ interests

⑥ Anyone who violates the provisions of paragraphs 1 to 5 shall be responsible for compensating the losses suffered by users due to violations when buying, selling or otherwise trading virtual assets.

Article 11 (Prohibition of arbitrarily blocking deposits and withdrawals of virtual assets) ① In the absence of a justifiable reason stipulated by the Presidential Decree, the virtual asset business shall not prevent users from depositing or withdrawing virtual assets (WEEX Note: No Freely restrict user deposits and withdrawals and limit transactions).

**② If a virtual asset business operator prevents a user from depositing or withdrawing virtual assets, it shall notify the user of the reason in advance and immediately report this fact to the Financial Services Commission. **

③ A person who violates the provisions of Subparagraph ① shall compensate for the losses suffered by the person who traded or consigned virtual assets based on the transaction or consignment price resulting from the violation.

④ The right to claim compensation under paragraph ③ shall lapse due to the statute of limitations if the claimant fails to exercise the right within two years after becoming aware of the violation of paragraph ① or within five years after the act occurred. (WEEX Note: The statute of limitations is up to 5 years)

Article 12 (Monitoring of Abnormal Transactions) ① Virtual asset market operators who open and operate a virtual asset market shall monitor abnormal transactions prescribed by Presidential Decree (hereinafter referred to as "abnormal transactions"), such as abnormal prices or transaction volumes of virtual assets Fluctuating transactions, and take appropriate measures prescribed by the Financial Services Commission to protect users and maintain a good order of transactions.

② If a virtual asset operator under subparagraph ① suspects a violation of Article 10, he shall notify the head of the Financial Services Commission and the Financial Supervisory Authority without delay (under Article 24, Paragraph 1 of the Financial Services Commission Establishment Act) Head of the Financial Supervisory Authority, hereinafter referred to as the "Financial Services Commission"). However, in cases prescribed and notified by the Financial Services Commission, for example, when a suspected violation of Article 10 is sufficiently substantiated, the person concerned shall report to the investigating agency without hesitation and to the head of the Financial Services Commission and the Financial Supervisory Authority fact.

Chapter IV Supervision and Disposal, etc.

Article 13 (Supervision and inspection of virtual asset business) ① The Financial Services Commission may supervise virtual asset business for proper compliance with this Act or any order or disposition prescribed in this Act, and may inspect the business and property status of virtual asset business.

② In order to protect users and maintain good transaction order, the Financial Services Commission may, when necessary, order virtual asset business operators or stakeholders specified by Presidential Decree to take necessary measures regarding any of the following:

1. Matters related to submission of documents to verify proper compliance with this Act or orders or dispositions prescribed by this Act

2. Matters related to management of unique property

3. Matters related to storage and management of user property

4. Matters related to maintenance of trade order

5. Matters relating to business methods

6. Matters related to protecting users in the event of business interruption, such as dissolution resolutions or declarations of bankruptcy

7. Other necessary matters stipulated by Presidential Decree to protect users and maintain good trade order

③ When conducting the inspection prescribed in paragraph ①, the Financial Services Commission may require a virtual asset business operator to report its business or property, submit data, attend witnesses, provide testimony, and express opinions if deemed necessary.

④ A person conducting an inspection under paragraph ① shall wear a certificate indicating his authority and show it to the relevant person. The Financial Services Commission may prescribe and notify inspection methods and procedures, criteria for taking action on inspection results, and other necessary matters related to inspection operations.

Article 14 (Investigation and measures against unfair trading practices) ① The Financial Services Commission may order a person suspected of violating this Act or an order or disposition under this Act to submit a report or data for reference, or When it is necessary for users or sound transaction order, the person in charge of the Financial Supervisory Authority can be prompted to check books, documents or other things.

② For the purpose of conducting an investigation under paragraph ①, the Financial Services Commission may require a person suspected of committing a crime or other relevant person to provide any of the following:

1. Filing a statement of the facts and circumstances of the investigation

2. Come forward and make a statement about the investigation

3. Presentation of books, documents and other items required for the investigation

③ When conducting an investigation under paragraph ①, if it considers that it is necessary to investigate a matter in violation of Article 10, the Financial Services Commission may take any of the following measures:

1. Detention of books, documents and other items submitted under paragraph ②

2. Examination of business, books, documents and other items by entering the office or place of business of the person concerned

④ If the Financial Services Commission deems it necessary to conduct an investigation under paragraph ①, it may request the virtual asset operator to submit data necessary for the investigation in accordance with the method prescribed by Presidential Decree.

⑤ A person conducting an investigation under subparagraph ③② shall bring a certificate indicating his authority and show it to the relevant person.

⑥ The Financial Supervisory Commission may disclose the results of the investigation and handling of relevant persons, and other information and data necessary to prevent misconduct by relevant persons in the manner prescribed by Presidential Decree.

⑦ The head of the Financial Supervisory Service shall report to the Financial Services Commission the results of investigations conducted under paragraph ①.

**Article 15 (Measures against virtual asset companies)**① When the Financial Services Commission finds that a virtual asset company or a stakeholder designated by Presidential Decree violates this Act or an order or disposition stipulated in this Act, the Financial Services Commission may take actions that are Any of the following measures:

1. Order to correct violations

2. Warning

3. Warning

4. Suspension of all or part of business

5. Notification or referral to law enforcement

② If the Financial Services Commission finds that an employee of a virtual asset business has violated this Act or an order or disposition under this Act, it may take any of the following measures against the employee involved in the violation:

1. Recommendation to dismiss or suspend officials within six months

2. Requests for dismissal or suspension of employees

3. Requiring an admonition, warning or reprimand of an employee

③ If the Financial Services Commission intends to make a disposition corresponding to a recommendation for dismissal or a request for dismissal under the provisions of paragraph ②, it shall hold a hearing.

Article 16 (Request for documents from the Bank of Korea) If the Financial Services Commission considers that for the purpose of conducting monetary and credit policies, financial stability, and the smooth operation of payment and settlement systems related to virtual asset transactions, the Bank of Korea may request virtual assets Operator provides documentation. In this case, the requested data should be limited to the minimum necessary, taking into full consideration the business burden of the virtual asset operator.

**Article 17 (Penalties for Unfair Transaction Acts)**① The Financial Services Commission may impose penalties on persons who violate the provisions of Article 10, paragraphs ① to ④, for an amount not exceeding the profit obtained from the violation (including Unrealized profits, hereinafter referred to as this article) or 2 times the amount of losses avoided due to illegal acts. If there is no profit obtained from the transaction related to the illegal act or the amount of loss avoided due to the illegal act, or if it is difficult to calculate, a fine of not more than 4 billion won (WEEX Note: about 3.073 million U.S. dollars) may be imposed.

② When imposing a fine under subsection ①, if the penalty is imposed for the same offense under Article 19, the Financial Services Commission may cancel the penalty imposed under subsection ① or exclude from the penalty an amount equivalent to the penalty in whole or in part Amount (including any forfeited or recovered amount).

③ If the Financial Services Commission requests materials related to the investigation in order to impose penalties under paragraph ①, the Attorney General may provide such materials to the extent deemed necessary.

④ The provisions of Articles 431 to 434 and Articles 434(2) to 434(4) of the Capital Market and Financial Investment Business Act shall apply to the submission of relevant fines, appeals, extension of deadlines for payment of fines and installments, collection of fines and Advice on processing arrears, refunding overpayments, calculating refund values and handling defects.

⑤ In addition to the provisions of subparagraphs ① to ④, necessary matters concerning the procedures and standards for imposing penalties shall be prescribed by Presidential Decree.

Article 18 (Delegation) The Financial Services Commission may delegate any part of its duties under this Act to the Director General of the Financial Supervisory Service, as prescribed by Presidential Decree.

Chapter Five Punishment

Article 19 (Punishment) ① Anyone who falls under any of the following items shall be sentenced to fixed-term imprisonment of not less than one year, or a fine of not less than three times but not more than five times the amount of the profit obtained or the loss avoided by the crime. However, if it is impossible or difficult to calculate the amount of profits gained or losses avoided due to the crime, or the amount equivalent to five times the profits gained or losses avoided due to the crime is less than 500 million won, the fine shall be capped at 500 million won South Korean won (WEEX note: about 384,000 U.S. dollars).

1. Violating the provisions of Article 10, paragraph 1, using or causing others to use undisclosed important information related to virtual assets to purchase, sell or otherwise transact new assets

2. Violating the provisions of Article 10, paragraph 2, committing acts that fall under any of the same paragraphs in order to mislead others about the nature of the purchase or sale of virtual assets, or causing others to make wrong judgments in other ways

3. Engaging in the sale or consignment of virtual assets, or the act of floating or fixing the market price of virtual assets in violation of Article 10, paragraph ③, for the purpose of attracting sales or purchases of virtual assets, misleadingly giving the impression that sales or buying is booming

4. A person who engages in any of the acts listed in paragraph ④ of Article 10 related to the sale and purchase of virtual assets or other transactions

**WEEX Weex (weex.com) Summary: Insiders who conduct insider trading, "swipe orders" false transactions, manipulate prices, and use various means to commit fraud shall be sentenced to fixed-term imprisonment of more than one year, or the amount of profit 3-5 times the fine, or a maximum fine of 500 million won. **

② A person who engages in buying and selling virtual assets issued by himself or an affiliated party in violation of Article 10, Subparagraph 5 shall be punished with imprisonment for a term not exceeding 10 years, or with the amount of the profit obtained from the crime or the loss avoided A fine of more than 3 times and less than 5 times. However, if the profit obtained or the loss avoided due to the crime cannot be obtained or is difficult to calculate, or if the amount equivalent to five times the profit obtained or the loss avoided due to the crime is less than 500 million won, the upper limit of the fine shall be 500 million won .

WEEX Summary: Anyone who conducts related party transactions shall be sentenced to a fixed-term imprisonment of less than ten years, or a fine of 3-5 times the amount of profit, or a fine of up to 500 million won.

③ If the amount of profit gained or loss avoided due to violation of paragraph ① exceeds 500 million won, the imprisonment prescribed in paragraph ① shall be aggravated according to the following paragraphs:

1. If the amount of profit or loss avoided exceeds 5 billion won: Life imprisonment or imprisonment for more than 5 years (WEEX Note: If the amount of insider trading profit exceeds 5 billion won, the maximum penalty is life imprisonment)

2. If the amount of profit or loss avoided is more than 500 million won but less than 5 billion won: Imprisonment for more than 3 years

④ If the amount of profit gained or loss avoided due to violation of the provisions of Subsection ② is 500 million won or more, the prison term of Subsection ② shall be increased according to the following subsections:

1. If the amount of profit or loss avoided is 5 billion won or more: Imprisonment for 3 years or more

2. If the amount of profit or loss avoided is more than 500 million won but less than 5 billion won: Imprisonment for not less than 2 years

⑤ In the case of imprisonment as prescribed in paragraphs ① to ④, disqualification for a period not exceeding 10 years and a fine may be combined.

⑥ The amount of profits (including unrealized profits) or avoided losses in violation of paragraphs ① and ② shall be the difference between the total income generated by the transaction through the violation and the total cost of the transaction (WEEX Note: Calculated on the amount of illicit profit/avoided loss, not the amount involved. ie, if insider trading results in a loss, the circumstances are lessened). In this case, the specific calculation method for each category of crime shall be determined by Presidential Decree.

**Article 20 (Confiscation and Confiscation)**① The property acquired by a person falling under Article 19 Item ① and Item ② shall be confiscated, and if it cannot be confiscated, its value shall be confiscated. Property offered or attempted to be offered by persons falling under Items ② to ④ and ② of Article 19 shall be confiscated, and if confiscation is not possible, its value shall be collected.

Article 21 (Penalties) If a representative of a legal entity (including an organization, referred to in this article) or an agent, user or other employee of a legal entity or individual violates Article 21 in the affairs of a legal entity or individual Article 19 stipulates that, in addition to punishing the perpetrator, a legal entity or individual shall be fined under this Article. However, this is not the case if the legal entity or person fails to exercise due care and supervision over the affairs of the legal entity or person in order to prevent the commission of the crime.

Note from WEEX: The company will also be punished if the employee breaks the law, but if the company has made efforts to monitor and prevent the crime in advance, it can be exempted.

**Article 22 (Fine)**① A fine not exceeding 100 million won (WEEX note: about 77,000 U.S. dollars) shall be imposed on a person who falls under any of the following items:

1. Violating the provisions of Article 6 and illegally managing user deposits

2. Illegal storage of user virtual assets in violation of Article 7

3. Failure to take necessary measures such as obtaining insurance or deductibles or accumulating reserves in violation of Article 8

4. Failure to establish, preserve or destroy virtual asset transaction records in violation of Article 9

5. Those who do not report in accordance with Article 11, paragraph ② or report falsely

6. Failure to take appropriate measures against unusual transactions in violation of Article 12, Paragraph 1

7. Failure to notify or report in accordance with Article 12, paragraph ②, or false report

8. Failing to comply with or refusing, obstructing or evading inspections, investigations, orders or requests in accordance with Articles 13 to 15

② The penalties of Subparagraph ① shall be implemented and collected by the Financial Services Commission in accordance with the methods and procedures prescribed by Presidential Decree.

appendix

Article 1 (Effective Date) This law will come into effect one year after its promulgation (WEEX Note: It is expected to be implemented in July 2024).

Article 2 (Amendments to other laws) (omitted)