Regulation
600 Cryptocurrencies Face South Korea’s Regulatory Review
South Korea’s financial authorities intend to revalue the listing of around 600 cryptocurrencies traded on national exchanges.
This rigorous review aims to ensure compliance with new regulations under the Virtual Asset User Protection Act, effective July 19th.
Delisting concerns grow as South Korea tightens crypto regulations
Local media recently reported that the The South Korean government has finalized a best practice plan to support virtual asset transactions. This plan outlines strict new requirements for listing cryptocurrencies on national exchanges. The current system, in which exchanges conduct their own internal reviews, will be complemented by a more rigorous review process established by authorities.
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The new rules the central objective is list screening. Under the current system, exchanges individually review and list cryptocurrencies. However, by implementing the best practice plan, the authorities will establish standards that all listed cryptocurrencies will have to meet.
A financial authority official explained that the exchanges will review every six months whether to maintain transaction support for each virtual asset. Subsequent reviews would then occur every three months.
“It is inevitable that transaction support will be suspended for virtual assets that do not meet the standards for maintaining transaction support,” the official said added.
Nine key screening requirements are at issue. These include checking whether the cryptocurrency format is suitable for listing, assessing the reliability of the issuer, ensuring the presence of user protection mechanisms, evaluating the technology safety levels and confirming compliance with national laws and regulations.
South Korean authorities will evaluate the reliability of issuers by examining their information disclosure practices and verifying the circulation of cryptocurrency. For user protection, authorities will check whether an on-chain explorer can track white papers and blockchain activity.
New security standards and quality criteria for cryptocurrency listings
Regarding technical security, cryptocurrencies must have no history of hacking incidents and disclose the source codes of their smart contracts. Additionally, coins and tokens issued directly from stock exchanges, coins and tokens that hide transaction history and more cryptocurrencies that violate current laws they will not be eligible for listing.
Authorities are also evaluating qualitative screening requirements. These include subjective and descriptive questions in addition to multiple choice questions.
Merely satisfying the formal requirements will not guarantee the listing status of the assets. Issuers must also demonstrate complete disclosure, a reasonable issuance and circulation plan, and a credible business history.
Even if a cryptocurrency meets all formal requirements, South Korean authorities may still challenge its listing based on qualitative criteria. However, exceptions exist for assets that have been traded without problems for more than two years on well-regulated foreign exchanges.
South Korea is home to 29 domestic cryptocurrency exchanges, including Upbit. According to CoinGecko dataUpbit has the thirteenth highest trading volume globally.
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This regulatory review could have a significant impact South Korea’s cryptocurrency market. Given that altcoins account for more than 60% of the market’s trading volume, the new measures could lead to a substantial contraction of the local cryptocurrency market. Coins with low trading volumes and problematic listing communications are expected to be the first to be delisted.
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