Financial Services Commission and Industry Establish 'Digital Asset Protection Foundation'
Autonomous Operation Centered on Daksaja "Expecting Establishment of Sound Market Order"
Amid growing concerns over the return of user assets due to the hasty closure of some virtual asset exchanges, financial authorities and the virtual asset industry have begun establishing a foundation to serve as a 'safety net.'
The Financial Services Commission announced on the 25th that it will approve the establishment of the 'Digital Asset Protection Foundation,' autonomously promoted by the industry centered around the 'Digital Asset Exchange Joint Council (DAXA)' on the 26th.
The creation of this foundation aims to alleviate concerns over user protection following the closure of virtual asset exchanges. Since the enforcement of the 'Virtual Asset User Protection Act (Virtual Asset Act)' on July 19, stricter regulations have led exchanges facing financial difficulties to suddenly declare closures or suspensions of operations. Currently, out of 22 coin market exchanges, 10 have ceased operations, and 3 have suspended them. Although the financial authorities have prepared closure guidelines that include supporting normal withdrawals for at least three months after the closure date and prohibiting excessive withdrawal fees, many cases of non-compliance have been detected.
The newly established foundation will be a non-profit corporation under the jurisdiction of the Financial Services Commission, with DAXA contributing assets for this purpose. Its main task is to autonomously receive users' assets from exchanges that have ceased operations and return them to the users. User deposits will be entrusted to one bank, and virtual assets will be entrusted to one won currency market exchange for safekeeping and management. The foundation plans to establish an operating committee composed of the entrusted bank, the won currency market exchange, the Korea Inclusive Finance Agency, the Financial Security Institute, and private experts. After completing follow-up procedures such as court registration, the foundation is expected to begin operations as early as October.
The Financial Services Commission will impose obligations as additional conditions for the foundation's establishment to comply with the Virtual Asset Act and the closure guidelines for virtual asset service providers. It will also support negotiations for the transfer of user assets between the foundation and the closing exchanges. In the future, the commission plans to conduct renewal reviews of virtual asset service providers under the 'Act on Reporting and Using Specified Financial Transaction Information' and guide providers confirmed to be closing their operations to the foundation.
The Financial Services Commission stated, "With the establishment of the foundation, users of exchanges that have ceased operations will be able to safely protect their assets," and added, "It is expected to minimize market confusion caused by the closure of some exchanges and contribute to establishing a sound market order."
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