South Korea establishes a digital asset user protection foundation to assist users of collapsed cryptocurrency exchanges in recovering funds

ChainCatcher news, according to Cointelegraph, South Korea will establish a Digital Asset User Protection Foundation to help users of collapsed cryptocurrency exchanges recover their funds. The foundation is initiated by the self-regulatory organization Digital Asset Exchange Alliance (DAXA) and has been approved by the Financial Services Commission (FSC) of South Korea, with plans to launch in October. The FSC stated that out of 22 cryptocurrency exchanges in South Korea, 10 have already closed, and another 3 have suspended operations, raising concerns about the return of funds to users of the collapsed exchanges.

In addition, the safety of user funds at exchanges is also a key concern, as "the private keys for users' virtual asset wallets are stored with the exchange service providers." The foundation will negotiate with the collapsed exchanges to transfer users' funds and virtual assets to the foundation. User cash will be stored in banks, while users' virtual assets will be stored and managed by a still-operating cryptocurrency exchange. The foundation will then contact users to inform them of the fund recovery process. The Digital Asset User Protection Foundation will establish an operational committee composed of representatives from banks managing user funds, exchange representatives, and several experts from government agencies and the private sector. The government will support the foundation.

According to previous reports, South Korea enacted the "Virtual Asset User Protection Act" on July 19, requiring exchanges to store customer deposits in banks and to separate customers' virtual assets from their own assets.