South Korea enacted the Virtual Asset User Protection Act to protect investors from uncertainties and instability in virtual currency trading. This legislation was implemented starting in July 2024 and has shut down eleven exchanges, leaving a substantial $12.8 million in assets stranded. This development shows that the government is committed to improving the transparency and security of the digital currency industry.
The act creates a new method for returning assets and allows investors to retrieve their money if an exchange has collapsed. Such a move is believed to revive investors' confidence and maintain the credibility of transactions in the digital asset market. Creating the Digital Asset User Protection Foundation under the act further aids investors by managing the recovery process and sparing them from navigating complex legal challenges.
The recent closures have affected 33,906 investors, who now can reclaim cashable and virtual assets totalling 17.8 billion won ($12.8 million). Among the exchanges, Cashierest held the most customer assets, amounting to 13 billion won ($9.4 million). Following closely are ProBit and Huobi Korea, with assets of 2.25 billion ($1.63 million) and 579 million ($420,000), respectively. This regulatory intervention aims to provide investors with a safety net and prevent funds' loss through failed platforms.
However, the situation remains critical for assets locked in three temporarily halted exchanges—Oasis, Flata Exchange, and Btrade. These platforms collectively hold an additional 30.7 billion won ($22.2 million), affecting more investors. The continued suspension of these exchanges adds to the uncertainty in the market as investors await decisions on the resumption of operations and access to their funds.
The regulations under the FSC are mostly strict, given the recent incidents involving cryptocurrencies and leading players such as the founder of the Terra cryptocurrency, Do Kwon. These events have increased regulatory measures to fight illicit business, including the entrepreneur Do Kwon case.
Representative Kang Min-kuk of the ruling People Power Party has indicated that the FSC's ongoing renewal review process might lead to further operational halts or closures of crypto exchanges.