South Korea Launches Foundation for Crypto User Protection

Introduction to Digital Asset User Protection in South Korea

The landscape of cryptocurrency continues to evolve, and with it comes the imperative for enhanced customer protection. In South Korea, the establishment of the Digital Asset User Protection Foundation marks a significant development in safeguarding the interests of cryptocurrency users. This initiative has been approved by the Financial Services Commission (FSC) of South Korea and spearheaded by the Digital Asset Exchange Joint Consultative Group (DAXA).

Background of the Initiative

Given the recent downturn in the cryptocurrency market, concerns have surged regarding lost funds. Reports indicate that out of 22 cryptocurrency exchanges presently operating in South Korea, 10 have recently shut down, while three others have suspended operations. This situation raises urgent questions regarding the retrievability of user assets.

The Need for a Systematic Management Mechanism

The safety of customers' funds has undoubtedly become a pressing issue as private keys to users' virtual wallets are stored with these exchange service providers. To tackle this challenge, the FSC emphasized the necessity of a systematic management approach, alongside voluntary efforts from exchanges that have ceased operations.

Operational Framework of the Foundation

Slated to begin operations in October, the Digital Asset User Protection Foundation will collaborate closely with existing exchanges to facilitate the transfer of users' funds and virtual assets. This process involves:

• ***Transferring funds and assets from closed exchanges to the foundation***.
• ***The selection of a bank that will securely hold users' cash deposits***.
• ***An exchange service provider will be designated to manage the users' virtual assets denominated in South Korean won***.

After completing these steps, the foundation will notify users about the mechanism for retrieving their assets, ensuring transparency and orderliness in the process.

Support and Structure of the Foundation

The successful operation of the Digital Asset User Protection Foundation will be backed by an operating committee comprising individuals from different sectors. This includes representatives from the bank handling the users' assets, various government organizations, and private sector experts specializing in digital assets and finance.

The South Korean government has pledged its support for the foundation by ensuring that consultations pertaining to the transfer of customer assets are conducted smoothly and efficiently.

Future Steps and Legislative Support

In light of potential future closures of exchanges, authorities will also provide guidance on how customers' assets can be transferred to the foundation. To further buttress user protection measures, South Korea has enacted the Virtual Asset User Protection Act as of July 19. This act mandates cryptocurrency exchanges to:

• ***Keep customer deposits secured in reputable banks***.
• ***Separate customer virtual assets from their own operational funds***.

Conclusion

The introduction of the Digital Asset User Protection Foundation serves as a crucial step toward enhancing the security of cryptocurrency users in South Korea. Through a systematic approach to asset management and the backing of government initiatives, users can expect improved measures to retrieve their funds and ensure their financial security moving forward.

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