"What is the impact on my business of the Specific Financial Information Act and the Virtual Asset User Protection Act?"

Law firm Veat recently provided legal advice to a company operating a web3 platform (hereinafter referred to as the "customer") regarding its obligations under laws and regulations such as the 「Act on Protecting Users of Virtual Assets」 (hereinafter referred to as the "Virtual Asset User Protection Act") and what points to pay attention to in order to comply with them.

1. Determination of Virtual Asset Business Operator Status

A "virtual asset business operator" who is subject to the regulations of the Specific Financial Transaction Information Act means a person who engages in the act of selling or buying virtual assets as a business.

Regarding the term "a person who engages in it as a business," the Supreme Court has generally stated that "engaging in it" means repeatedly and continuously engaging in the same act for the purpose of profit (referring to Supreme Court Decision 98Da10793, July 10, 2000), and whether or not "engaging in it" is deemed, should be considered comprehensively, taking into account the presence or absence of repetition, continuity, business nature, purpose, scale, number of times, period, and disposition, in accordance with social norms (referring to Supreme Court Decision 2012Da86525, June 14, 2012).

In particular, according to the “Virtual Asset Business Operator Reporting Manual” published by the Financial Intelligence Unit and the Financial Supervisory Service in February 2021, acts of trading virtual assets for one’s own benefit (P2P, etc.), one-time acts, and acts of simply providing a platform without charging a fee are excluded from virtual asset business operators.

Law firm Veat, based on a thorough understanding of the customer's business model, reviewed whether the customer's business activities constituted trading or buying virtual assets, and provided legal advice on whether the customer's virtual asset-related business activities could be deemed to be engaged in as a business, taking into account the Supreme Court’s precedents and the Financial Supervisory Service’s position.

2. If the Customer is a Virtual Asset Business Operator: Customer Identification Duty

Even if the customer company does not qualify as a financial institution, etc. under the Specific Financial Transaction Information Act, the financial authorities are cracking down on transactions related to virtual assets. In particular, the Specific Financial Transaction Information Act requires financial institutions, etc. to bear the obligation to confirm certain items regarding customers who are virtual asset business operators.

​Therefore, Law firm Veat conducted a legal review of whether the customer company qualifies as a financial institution, etc. under the Specific Financial Transaction Information Act and whether the customer is a virtual asset business operator, and advised the customer on the points to pay attention to in order to comply with the applicable laws and regulations.

Comply with the Virtual Asset User Protection Act and Specific Financial Transaction Information Act, seek professional legal advice

Whether a company engages in the business, and is subject to regulation under the Specific Financial Transaction Information Act and the Virtual Asset User Protection Act, may vary depending on whether the company is deemed to be an virtual asset business operator, with the presence or absence of repetition, continuity, business nature, purpose, scale, number of times, period, and disposition.

​Therefore, whether or not a person is a virtual asset business operator is difficult for a general person to determine on their own. Especially in the case of the Virtual Asset User Protection Act, since it is a law that went into effect on July 19, 2024, it is necessary to clearly understand the precedents and the position of the Financial Supervisory Service in order to comply with the law, and we recommend that you receive a legal review from a legal expert.

Law firm Veat provides customized legal advice to various companies in the virtual asset, fintech, blockchain, and financial regulation fields. Therefore, if you have questions about compliance with the Virtual Asset User Protection Act or if a legal problem arises during the execution of virtual asset-related work, please feel free to contact Law firm Veat.

This case study can also be viewed on the Law firm Veat blog below.

- What is the impact on my business? Specific Financial Transaction Information Act and Virtual Asset User Protection Act

Thank you.

Law firm Veat