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In a bold move to protect cryptocurrency users, South Korea is launching the Digital Asset User Protection Foundation to recover funds from failed exchanges. Supported by financial authorities, the initiative seeks to secure virtual assets and restore trust in the nation's crypto ecosystem.
The Digital Asset User Protection Foundation is emerging as a new ally for South Korean cryptocurrency exchange consumers, helping to facilitate the repatriation of funds held by now-defunct exchanges.
Digital Asset Foundation Launched to Protect Users
The self-regulatory Digital Asset Exchange Joint Consultative Group (DAXA) sought approval from South Korea's Financial Services Commission (FSC) to establish the foundation. In October, the foundation might launch its operations.
Ten of South Korea's twenty-two cryptocurrency exchanges have shut down, while three more have temporarily halted operations, according to the FSC. This has some people worried about getting their money back from the inoperable exchanges.
Virtual Asset Security in Question
Since the private keys to users’ virtual asset wallets are stored at these exchange service providers, consumer confidence in the exchanges' ability to keep their money secure is another issue. Therefore:
“To make sure that users’ assets are safely protected and properly returned to their owners, it is necessary to have a more systematic management mechanism along with voluntary efforts from those closed down exchange service providers.”
New Recovery Process for Affected Users
Following consultations with the exchanges, the Digital Asset User Protection Foundation will receive user funds and virtual assets.
After that, users' fiat currency would be held by a designated bank, while their virtual assets will be stored and managed by a KRW-based (South Korean won-based) exchange service provider, as reported by Cointelegraph.
Users Will Receive Recovery Notifications
Afterwards, the users will be notified of the return procedure by the foundation.
A number of government institutions and business sector specialists, as well as representatives from the bank and exchange that will manage the virtual assets and currency, will make up the operating committee of the Digital Asset User Protection Foundation. The government is going to support the nonprofit:
“Financial authorities plan to provide relevant support to facilitate consultation […] regarding the matter of transfer of users’ assets.”
Government and Industry Collaboration Ensured
Authorities will guide them accordingly to transfer their customers’ assets to the foundation in the event that an exchange goes out of business.
The Virtual Asset User Protection Act was passed by South Korea on July 19. Exchanges are obligated to maintain customer funds in separate bank accounts and to safeguard customer virtual assets from their own, according to the act.
