South Korea’s National Assembly passed the Virtual Asset User Protection Act on Friday, marking the country’s first step towards building a legal framework for virtual assets.

The legislation, which will take effect next year, is compiled from 19 proposals from lawmakers. It defines digital assets and sets out penalties for unfair transactions. Service providers must segregate user assets, have insurance, hold some reserves in cold wallets and maintain records of all transactions.

The bill gives the Financial Services Commission authority to oversee and inspect service providers. The Bank of Korea has the right to request data from service providers.

Virtual assets have come under more scrutiny in the country following an investigation into a domestic lawmaker’s crypto holdings and last year’s collapse of Terraform Labs.