Summary
- Fifteen virtual asset service providers in South Korea have shut down, leaving 22.114 billion won ($15.8 million) in user assets unreturned.
- The Digital Asset Protection Foundation has been established, but actual asset returns totaled just 74.52 million won ($53,000), or about 0.3%% of all unreturned assets.
- Rep. Kang Min-kuk said post-shutdown safeguards remain inadequate, citing the lack of a mandatory asset transfer requirement and insufficient guidance from the foundation on how users can apply for returns.
Forecast Trend Report by Period
The number of South Korean virtual asset service providers suspending operations is rising, with more than 22.114 billion won ($15.8 million) in user assets still unreturned. Although a Digital Asset Protection Foundation has been launched, the actual recovery rate remains below 1%.
Yonhap's Newsis reported on May 12 that lawmaker Kang Min-kuk of the ruling People Power Party received data from the Financial Supervisory Service showing 15 domestic virtual asset service providers had ceased operations as of May 4.
Of those, 10 companies had confirmed figures for user numbers and assets held. For one company, only the amount of virtual assets was identified. For the remaining four, neither user data nor asset scale was confirmed.
The 10 companies counted so far had a combined 1,949,742 users. Unreturned cash deposits and virtual assets after the closures totaled 22.114 billion won ($15.8 million).
The market has raised concerns that post-closure safeguards for user assets remain inadequate.
DAXA, the Digital Asset eXchange Alliance, established the Digital Asset Protection Foundation in October 2024 to support the return of assets to users of exchanges that had shut down. The foundation is tasked with taking over, storing and managing user assets transferred from operators before returning them.
Actual returns, however, have been limited. As of May 4, only five of the 15 operators had returned assets. A total of 174 users had applied for repayment, and 74.52 million won ($53,000) had been returned to 131 of them.
That amounts to about 0.3% of all unreturned assets.
Under current law, virtual asset service providers are not required to transfer user assets to the Digital Asset Protection Foundation when they shut down, Kang said, leaving little enforcement power. He also said the foundation has not done enough to inform users about the claims process.
Kang added that the foundation needs to strengthen its guidance system to reduce user losses. He said financial authorities should also accelerate follow-up legislative discussions, including mandating asset transfers.
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.
