According to the South Korean Financial Services Commission (FSC), the country has moved to the establishment of a nonprofit organization. The aim of the NGO is to safeguard crypto assests and blockchain belongings.
The FSC has approved the Digital Asset Protection Foundation to help return assets from defunct crypto exchanges. This is done to ensure better security for users in the crypto market.
The Digital Asset Protection Foundation will guarantee actual cashback to users who have been locked out when some exchanges shut down their operations. The foundation is expected to be launched in October. As ten out of the 22 exchanges in the country have shut down.
Crypto Asset Protection for Exchange Failures
The Digital Asset Protection Foundation will help to recover the virtual assets of users from such exchanges that have shut down. FSC has been trying to tackle asset security issues after the exchange shutdown. The panel was informed of the challenges that users go through to retrieve their assets.
In the statement, FSC explained that they have faced difficulties in recovering the assets. It is because they are often unable to access the operators or users of the closed exchange platforms.
Ongoing Crypto Exchange Closures Highlight the Need
Among 22 local digital currency trading platforms, 10 of them ceased to exist, while 3 more suspended their working. The increasing number of such systems has prompted the question of whether users can continue to access their assets.
It has further contributed to the foundation’s establishment. The FSC has recalled the importance of having a proper organization to take back the assets from these bad exchanges.
Most of these closed exchanges do not have the capacity or means of dealing with and returning the assets themselves. The foundation will also serve as an intermediary so that even when the primary exchange can do nothing to regain users’ funds, they will be safe.
Operation and Structure of the Foundation
The Digital Asset Exchange Association (DAXA) has played a role in the establishment of the foundation. It has happened with support from the FSC.
It will ensure that consumers’ crypto or other assets are received, managed, and returned to the users. It’ll be done through coordination with financial institutions for their custody.
For the virtual assets, the authorized exchange provider will hold the assets. While for cash deposits, they will be retained with the banks.
A committee for operation will be formed comprising people from the financial institutions, government, and specialists of the industry. This committee will be responsible for the supervision of the foundation’s activities. As well as compliance with the law determined by the Virtual Asset User Protection Act.
Also, the foundation will cooperate with financial authorities, offering recommendations and ensuring consistent adherence to the legislation from the side of VASPs.
This will include future guidance for exchanges that may close in the future or any changes in the regulatory framework of such exchanges.
Future Developments and Implementation
The foundation is expected to start the consultation process with defunct exchanges as soon as next month after the registration exercise is completed. The organization will ensure that it helps users reclaim their assets from failed exchanges and inform users of the process.
Its formation can be regarded as a positive step towards the safeguarding of digital assets in the South Korean crypto market.
Similarly, the South Korean government has put off introducing an aggressively timely tax on gains made in cryptocurrencies until 2028, establishing a strong regulatory system before trying to implement levies.
