Cha & Kwon Law Offices recently provided legal advice to a client regarding the definition of "virtual asset" under the Virtual Asset User Protection Act. The primary focus was on interpreting the phrase “electronic token (including all rights related thereto)” as stated in the law, and determining whether derivatives based on virtual assets fall within this legal definition.

According to the Act, a “virtual asset” is defined as an electronic token with economic value that can be digitally transferred or traded, including all rights related to it. The phrase “all rights related thereto” is interpreted to mean rights that are inseparable from the token itself—those that automatically transfer or can be exercised in conjunction with the ownership or transfer of the token.

Meanwhile, derivatives based on virtual assets are financial instruments whose returns are linked to the value of the underlying virtual asset. However, since these products involve trading rights to value rather than the direct holding or transfer of the virtual asset itself, they are generally not classified as “virtual assets” under the Act.

This interpretation helps clarify the scope and application of the law and minimizes regulatory uncertainty. However, depending on the specific structure and nature of the derivative product, the legal assessment may differ, making it essential to seek expert legal review for each individual case.

With in-depth expertise in virtual asset law and extensive practical experience, Cha & Kwon Law Offices provides tailored legal solutions aligned with clients' business needs. For companies engaged in virtual asset or related financial services, our firm offers effective support in managing legal risks and regulatory compliance.