According to Cointelegraph, South Korea’s Financial Services Commission (FSC) approved the proposal of the Digital Asset Exchange Joint Advisory Group (DAXA) to establish a Digital Asset User Protection Foundation, which is expected to begin operations in October.
The FSC said that 10 of South Korea's 22 cryptocurrency exchanges have closed and another three have suspended operations, making it impossible for users to retrieve their funds. The security of user funds has also raised concerns because the private keys of users' virtual asset wallets are stored on these exchanges.
The Foundation will negotiate with the exchange to transfer user funds and virtual assets to the Foundation, and then select a bank to hold user cash and a KRW (Korean won) trading service provider to manage virtual assets.
The Foundation will contact users to inform them of the process for retrieving their funds. The government will support the Foundation’s operations and instruct exchanges that cease operations in the future to transfer user assets to the Foundation.
South Korea enacted the (Virtual Asset User Protection Act) on July 19, requiring exchanges to deposit customer deposits in banks and separate customer virtual assets from their own assets.