South Korean Crypto Exchanges to Delist Hundreds of Altcoins Under New Rules

Are you an altcoin investor in South Korea? Brace yourself! Major changes are coming to the South Korean crypto market that could significantly impact your portfolio. New regulations are about to shake things up, potentially leading to the delisting of hundreds of altcoins from local exchanges.

The Impending Delisting Wave: What’s Happening?

South Korean crypto exchanges are facing increased scrutiny as the Virtual Asset User Protection Act comes into force in July. This act empowers financial authorities to enforce stricter rules, leading to a potential mass delisting of altcoins. According to Daehan Kyungjae, regulators will be examining approximately 600 coins to determine whether they meet the new standards for continued transaction support.

Key Dates:

• July 19th: Virtual Asset User Protection Act comes into force.
• Starting Next Month: Regulators begin reviewing approximately 600 coins.

Who’s Affected? The Exchanges Under Scrutiny

The new regulations will impact both KRW-trading platforms (Upbit, Bithumb, Coinone, Korbit, and Gopax) and over 20 other exchanges that only offer crypto-to-crypto pairs. All 29 platforms will be required to conduct initial reviews to decide whether to delist or maintain support for the altcoins they list.

The Review Process: How Will Coins Be Evaluated?

Exchanges will conduct quarterly reviews of the coins listed on their platforms. Risky tokens will be flagged with cautionary notices before potential delisting. Regulators are giving exchanges a six-month grace period to review existing coins, followed by maintenance reviews every three months.

Review Highlights:

• Initial Review: Assess all listed altcoins.
• Quarterly Reviews: Ongoing monitoring of coin performance and compliance.
• Cautionary Notices: Flag potentially risky tokens.

The Listing and Delisting Unit: A New Watchdog

Exchanges are now required to create dedicated listing and delisting units. These teams will be responsible for assessing the security, reliability, and compliance of the coins on their platforms. The evaluation criteria include:

• Social credit
• Development activity
• Issuance details
• Information disclosure practices
• Transparency
• Issuance and distribution volumes
• Market capitalization
• Conflict of interest matters
• Other potential risks

Are There Exceptions? Projects That Might Be Safe

The regulations acknowledge the unique nature of decentralized projects. Alternative screening requirements will be provided for truly decentralized projects like Bitcoin and DAO-related projects. Major tokens like Ethereum (ETH) and XRP may also be exempt from certain protocols.

Possible Exceptions:

• Bitcoin (BTC)
• Decentralized Autonomous Organizations (DAOs)
• Ethereum (ETH)
• XRP

Additionally, coins traded for over two years in markets with stringent regulatory systems (e.g., the United States, the United Kingdom, France, Germany, Japan, Hong Kong, Singapore, India, and Australia) are likely to be approved.

Crackdown on Cash-for-Listings: Restoring Trust

The new rules aim to eliminate cash-for-listings scandals that have plagued South Korean exchanges. Exchanges that accept assets in exchange for enabling transaction support will face harsh penalties. This measure seeks to prevent artificial price manipulation of low-cap “kimchi coins.”

Looking Back: Previous Purges

In 2021, several major domestic crypto exchanges removed numerous low-cap “kimchi coins” from their platforms in anticipation of regulatory action. This foreshadowed the current wave of stricter regulations.

In Conclusion: Navigating the Changing Landscape

The South Korean crypto market is undergoing a significant transformation. Altcoin investors need to stay informed and prepared for potential delistings. By understanding the new regulations and the review process, you can make informed decisions about your investments and navigate this evolving landscape.