South Korean crypto exchanges could delist “hundreds of altcoins” this year, with financial authorities ready to step up new rules for policing the sector.
Per the newspaper Daehan Kyungjae, the new Virtual Asset User Protection Act comes into force in July.
That means that “starting next month,” regulators “will look into whether to [end] transaction support for about 600 coins on virtual asset exchanges.”
The media outlet said on June 16 that regulators are looking to “finalize a best practice plan for cryptoasset transaction support.”
The act comes into force on July 19, and is expected to shake up the industry. Fiat KRW-trading platforms, namely Upbit, Bithumb, Coinone, Korbit, and Gopax, will have to abide by its rules.
But these same rules will also apply to over 20 other exchanges that have not yet obtained KRW trading permits, and can only offer crypto-to-crypto pairs.
South Korean regulators will reportedly force 29 platforms to “conduct an initial review to determine” whether they will delist or maintain support for the 600 or so altcoins they collectively list.
Regulators will then force exchanges to conduct “quarterly” reviews of the coins on their platforms. Exchanges must flag potentially risky tokens with “cautionary notices” before eventually delisting them.
An unnamed regulatory official told the media outlet:
“In the case of coins that are currently being traded, we will support exchanges as they review their support over a six-month period. After that, they will have to conduct maintenance reviews once every three months.”
The new law will oblige all exchanges to create a listing and delisting unit that must assess the security, reliability, and compliance credentials of the coins on their platforms.
These exchange-operated teams must assess issues pertaining to the following:
- Social credit
- Development
- Issuance
- Information disclosure
- Transparency
- Issuance and distribution volumes
- Market cap
- Conflict of interest-related matters
- Other risks
‘Alternative Screening Requirements’ For Some Coins
In the case of truly decentralized projects such as Bitcoin and decentralized autonomous organizations (DAO)-related projects, “alternative screening requirements” will be provided.
However, regulators will likely let exchanges skip these protocols in the case of big-name tokens like Ethereum (ETH) and XRP.
The media outlet reported that “coins that have been traded for more than two years in overseas markets with stringent regulatory systems” would probably be green-lighted.
The Financial Supervisory Service officials visited Hong Kong to seek cooperation with financial authorities and investment banks there for the regulator’s efforts to stamp out illegal short selling.https://t.co/JaQ6sof5pb
— The Korea Herald 코리아헤럴드 (@TheKoreaHerald) May 22, 2024
The media outlet noted that these markets included “the United States, the United Kingdom, France, Germany, Japan, Hong Kong, Singapore, India, and Australia.”
The new rules will also impose harsh penalties on exchanges that “accept” assets in “exchange for enabling transaction support.”
Several cash-for-listings scandals have rocked confidence in South Korean exchanges in recent years.
Some claim that low-cap “kimchi coins” have won listings in suspicious circumstances. In many cases, prosecutors have alleged that this has been done in an attempt to artificially spike token prices.
The changes have been in the pipelines for several years. Back in 2021, several major domestic crypto exchanges purged scores of low-cap “kimchi coins” from their platforms in apparent anticipation of regulatory action.
