South Korea is set to establish the Digital Asset User Protection Foundation, aimed at helping cryptocurrency users recover funds trapped in now-defunct exchanges.
The initiative, approved by the Financial Services Commission (FSC), is backed by the Digital Asset Exchange Joint Consultative Group (DAXA) and could begin operations as early as October.
With nearly half of the country’s cryptocurrency exchanges either shuttered or suspended, concerns have risen over the safety of users’ assets.
Of the 22 registered exchanges in South Korea, 10 have ceased operations, while three more are on hold, leaving a significant number of users unsure about retrieving their funds.
The foundation will focus on transferring users’ virtual assets and funds from the defunct exchanges to secure channels.
Partnering with banks and functional crypto exchanges, the foundation will manage the process to ensure that both cash and digital currencies are safely stored.
Users will be contacted once the recovery process begins, with a designated bank holding their cash and a South Korean won-based crypto exchange managing their virtual assets.
This move follows the passing of the Virtual Asset User Protection Act in July, which requires exchanges to keep customer deposits in banks and ensure that customer assets are separate from the exchange’s funds.
The government plans to continue supporting the foundation, ensuring a seamless transfer of assets if other exchanges face similar shutdowns in the future.
