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South Korea’s crypto market faces fresh scrutiny after 15 domestic virtual asset service providers suspended operations, leaving more than 22.114 billion won, or $15.8 million, in user assets unreturned. Data from the Financial Supervisory Service showed the closures had affected nearly two million users as of May 4, while actual recoveries through the Digital Asset Protection Foundation remained below 1%.
Yonhap News reported on May 12 that lawmaker Kang Min-kuk of the ruling People Power Party received the data from the Financial Supervisory Service. The figures showed that 15 domestic virtual asset service providers had ceased operations by May 4. Among them, 10 firms had confirmed user and asset figures. One other company had only virtual asset data available, while four had no confirmed user or asset scale.
The 10 companies with available data had a combined 1,949,742 users. After the closures, their unreturned cash deposits and virtual assets totaled 22.114 billion won.
The assets included both cash deposits and virtual currencies. Their value came from end-March figures, according to the reported data.
The figures have raised concerns over South Korea’s post-closure safeguards for crypto users. The main concern now centers on whether investors can recover funds when service providers shut down.
DAXA, the Digital Asset eXchange Alliance, launched the Digital Asset Protection Foundation in October 2024. The foundation supports the return of user assets from exchanges that have shut down. Its role includes taking over, storing, and managing user assets transferred from operators. It then returns those assets to eligible users through a claims process.
So far, the recovery process has moved slowly. As of May 4, only five of the 15 operators had returned assets through the foundation. A total of 174 users had applied for repayment. Out of that group, 131 users had received 74.52 million won, or about $53,000.
That amount equals about 0.3% of all unreturned assets. The figure shows a large gap between trapped user holdings and completed repayments. At the same time, the number of applicants remains small compared with the nearly two million users linked to the closed providers. Kang said the foundation must improve its guidance system to reduce user losses.
Kang said the current law does not require virtual asset service providers to transfer user assets to the Digital Asset Protection Foundation when they shut down. That gap limits enforcement power.
He also said the foundation has not done enough to inform users about the claims process. As a result, some users may not know how to seek repayment. Kang urged financial authorities to speed up follow-up legislative discussions. These discussions include proposals that would make asset transfers mandatory after provider closures.
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South Korea has tightened crypto regulation since several major crypto failures shook the global market. The Financial Services Commission and FSS have introduced registration rules for virtual asset service providers. Authorities have also required providers to maintain certain capital reserves. Even so, the latest figures show that customer protection remains limited when firms suspend operations.
For affected users, the closures have created financial strain and weakened trust in crypto platforms. Many retail investors placed funds into these services before the operators stopped running. The low repayment level could also slow public confidence in digital assets. It may also push regulators toward stricter consumer protection measures.
Globally, customer asset recovery remains a major challenge after crypto exchange failures. The issue has appeared in markets such as the United States and Japan, where recovery methods vary. South Korea’s case reflects a wider industry problem. When platforms fail, tracing assets and returning funds can become difficult, especially when operators leave users with unclear recovery paths.
South Korea’s crypto closures have left $15.8 million in user assets unreturned across 15 providers. Although the Digital Asset Protection Foundation has started repayments, the recovery rate remains below 1%. The case points to growing pressure for stronger rules on asset transfers and user protection.
