South Korea’s authorities from the financial department plan to investigate around 600 cryptocurrencies listed on domestic exchanges. This review is considered pretty strict. Its goal is to ensure consent with the new Virtual Asset User Protection Act, which will take effect from July 19.
Delisting Concerns as South Korea Tightens Crypto Regulations
Local media reported that the government has finalized a best practice plan for virtual asset transactions. This plan outlines stringent new requirements for listing cryptocurrencies on local exchanges.
Previously, exchanges conducted their internal reviews. Now, a stricter review process will be established by authorities.
Focus on Listing Screening
The new regulations will centralize the listing screening process. There will be standards that all listed cryptocurrencies will have to meet.
Nine Key Screening Requirements
Authorities are discussing nine key screening requirements. These include verifying the cryptocurrency format, assessing issuer reliability, ensuring user protection mechanisms, evaluating technology security, and confirming compliance with domestic laws.
Technical Security and Compliance
One of the most important requirements is that cryptocurrencies shouldn’t have any hacking incidents in their history. They should also show their smart contract source codes. Coins issued directly by exchanges or those concealing transaction history will be ineligible for listing.
Qualitative Criteria for Crypto Listings
Authorities are also considering qualitative screening requirements. Meeting formal requirements will not guarantee listing. Issuers must demonstrate comprehensive disclosure, a reasonable issuance and circulation plan, and a credible business history.
Authorities may challenge listings based on qualitative criteria, but exceptions exist for assets traded without issues for over two years on well-regulated overseas exchanges.
Impact on South Korea’s Crypto Market
South Korea has 29 domestic crypto exchanges, including Upbit, which has the 13th-highest trading volume globally according to CoinGecko. This regulatory overhaul could significantly impact the local crypto market.
Altcoins, accounting for over 60% of the market’s trading volume, might substantially contract. The first coins to be delisted will be the ones with low trading volume.
