Virtual Asset Insurance is Mandatory, But 2 VASPs Remain Uninsured Amid Industry Downturn

Virtual Asset Insurance is Mandatory, But 2 VASPs Remain Uninsured Amid Industry Downturn

Reserve funds vary widely… Dunamu and Bithumb each accumulated 80 billion won, ranking first

Most subscribe to insurance with a minimum coverage of 500 million won under the User Protection Act

Although virtual asset service providers (VASPs) are legally obligated to subscribe to insurance for user protection, some companies have been confirmed to still be uninsured.

According to data submitted by Democratic Party lawmaker Park Sang-hyuk of the National Assembly's Political Affairs Committee to the Financial Supervisory Service (FSS) on the 2nd, as of the 14th of last month, two coin market exchanges were not insured.

The uninsured companies are Guardian Holdings and CoreDAX. Both were found to have subscribed to insurance covering 500 million won for one year from July 19 last year but did not re-subscribe after the term expired.

The other 26 companies either set aside their own reserve funds or subscribed to insurance with a coverage amount of 500 million won or more from companies such as Hanwha General Insurance, KB Insurance, Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and Heungkuk Fire & Marine Insurance.

Reserve funds and coverage amounts varied widely by operator. Most companies subscribed to insurance with a coverage amount of 500 million won, which is the minimum requirement under the Virtual Asset User Protection Act.

Dunamu and Bithumb have accumulated approximately 80 billion won in reserve funds, Coinone has 30 billion won, Korbit has 19 billion won, Hyperithm has 5.1 billion won, and WalletOne has approximately 500 million won in reserve funds.

The largest insurance coverage amount was Korea Digital Asset with 40 million dollars (approximately 55.3 billion won). Streami, which operates the virtual asset exchange Gopax, was second with 3 billion won.

According to the Virtual Asset User Protection Act, virtual asset service providers must subscribe to insurance or mutual aid, or set aside reserve funds, to fulfill their responsibilities for accidents such as hacking or system failures.

If an inspection by financial authorities reveals that a company has not subscribed to insurance or set aside reserve funds, it becomes subject to sanctions such as fines.

Nevertheless, as the virtual asset industry's conditions have worsened and individual companies' performance has deteriorated, some companies are reportedly experiencing periods of being uninsured during the insurance renewal process.

The FSS is encouraging uninsured companies to subscribe to insurance and plans to review the necessity and level of measures through future written inspections.