July 3 (Cointime) - South Korea has taken its first step towards establishing a legal framework for virtual assets with the passing of the Virtual Asset User Protection Act by the National Assembly. The legislation, which will take effect next year, includes 19 proposals from lawmakers and defines digital assets while setting out penalties for unfair transactions.

Service providers will be required to segregate user assets, hold insurance, maintain reserves in cold wallets, and keep records of all transactions. The Financial Services Commission will oversee and inspect service providers, while the Bank of Korea will have the right to request data from them.

The move follows increased scrutiny of virtual assets in the country, including an investigation into a lawmaker's crypto holdings and the collapse of Terraform Labs last year.