Web3-based sports training platform virtual asset business model legality review case

Recently, Law firm Veat received a request from a startup operating a Web3 sports training platform using Web3 technology, and comprehensively reviewed whether the virtual asset-related business model of the platform is legally compliant.

The platform provides services where users can exchange points earned during service use for virtual assets issued by the company. In addition, it implements a buy-back policy to increase the value of these virtual assets and is considering partnerships with other companies to manage virtual asset liquidity and stabilize prices.

Law firm Veat reviewed whether this business model complies with domestic virtual asset-related regulations and presented ways to operate it legally.

Review of Applicable Laws and Regulations Compliance Measures

Reporting Obligations of Virtual Asset Business Operators

According to the Act on Virtual Asset User Protection (hereinafter referred to as the “Virtual Asset User Protection Act”), a virtual asset business operator means an entity engaging in the act of selling, buying, exchanging, storing, or managing virtual assets as a business (Article 2(2)), and according to the Act on Reporting and Use of Specific Financial Transaction Information (hereinafter referred to as the “Specific Financial Transaction Act”), if it is deemed a virtual asset business operator, it must report its registration as a virtual asset business operator to the Financial Intelligence Unit (Article 17(1)).

If a company engages in virtual asset transactions as a business without registering as a virtual asset business operator with the Financial Intelligence Unit, it may be sentenced to imprisonment for up to five years or a fine of up to 50 million won (Specific Financial Transaction Act Article 17(1)).

Therefore, companies using virtual assets for business need to accurately determine whether they qualify as virtual asset business operators. However, whether an entity qualifies as a virtual asset business operator may vary depending on the specific circumstances of the company and its business, so it is necessary to seek the assistance of legal professionals with extensive experience in reviewing virtual asset and blockchain-related legal precedents.

Prohibition of Unfair Trading Practices by Virtual Asset Business Operators

The Virtual Asset User Protection Act generally prohibits virtual asset business operators from buying and selling virtual assets issued by themselves or their related parties and other transactions (Virtual Asset User Protection Act Article 10(5)).

If one violates this trading restriction and buys and sells virtual assets issued by themselves or their related parties, or engages in other transactions, they may be sentenced to imprisonment with or without hard labor for up to 10 years or a fine equivalent to three to five times the profit obtained from or loss avoided by the violation (Virtual Asset User Protection Act Article 19(2)), so it is necessary to pay particular attention to not constituting a prohibited unfair trading practice in accordance with the Virtual Asset User Protection Act.

Customized Consulting from Law firm Veat Based on Customer's Specific Situation

In this review, the Specific Financial Transaction Act and the Virtual Asset User Protection Act were primarily addressed. These laws stipulate reporting obligations for virtual asset business operators, prohibition of unfair trading, and protection of user assets.

Law firm Veat conducted a thorough review and customized consulting based on an understanding of the customer's specific situation and expertise in this field, so that the customer can comply with related regulations.

In particular, the main contents of the Virtual Asset User Protection Act, which came into effect in July 2024, were reflected to re-review the details of the business model so that the platform's service structure can comply with the law.

Law firm Veat's Differentiated Expertise

Law firm Veat has provided legal advice to numerous startups based on its outstanding expertise in the blockchain and virtual asset fields. In particular, Managing Partner Song Do-young has participated in the drafting process of the Virtual Asset Convergence Industry Promotion Act and has deep expertise in the field of virtual assets, and is strong in diagnosing legal risks in advance and providing solutions in the environment where virtual asset-related laws are newly changing.

If you need legal advice on blockchain and virtual assets, please consider receiving professional consulting from Law firm Veat.

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Law firm Veat