South Korea to Review 600 Cryptocurrencies

South Korea to Review 600 Cryptocurrencies

LawRegulation

By Jakub Lazurek

17 Jun 2024 (24 days ago)

3 min read

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South Korea to review 600 cryptocurrencies on local exchanges starting July 19, aiming to enhance compliance and security under new regulations.

South Korea's financial authorities will start a detailed review of about 600 cryptocurrencies on local exchanges starting July 19. This is part of new regulations under the Virtual Asset User Protection Act, aimed at improving reliability, security, and compliance.

The goal is to ensure all listed cryptocurrencies meet the new strict standards. The new framework will replace the current system, where exchanges individually assess and list cryptocurrencies, with a unified, transparent review process.

Recent reports highlight that the South Korean government has finalized a best practice plan for virtual asset transaction support. This plan introduces stringent requirements for listing cryptocurrencies on domestic exchanges, supplementing internal reviews currently done by exchanges.

An official explained that exchanges will review each virtual asset every six months, followed by reviews every three months. "Transaction support will be suspended for assets that do not meet the standards," the official noted.

Nine key screening criteria are being discussed. These include verifying the cryptocurrency’s suitability for listing, issuer reliability, user protection mechanisms, technology security levels, and compliance with domestic laws and regulations.

Authorities will examine issuers' reliability by checking their information disclosure practices and verifying the cryptocurrency's circulation. For user protection, they will ensure an on-chain explorer can track white papers and blockchain activity.

Cryptocurrencies must have no history of hacking incidents and must disclose their smart contract source codes. Coins and tokens issued directly by exchanges, those that conceal transaction history, and cryptocurrencies violating current laws will not be listed.

Authorities are considering additional qualitative screening, including subjective and descriptive questions alongside multiple-choice queries. Meeting formal requirements alone will not guarantee a listing. Issuers must also show comprehensive disclosure, a reasonable issuance and circulation plan, and a credible business history.

Even if a cryptocurrency meets all formal criteria, authorities may still challenge its listing based on qualitative factors. However, exceptions exist for assets traded without issues for over two years on well-regulated overseas exchanges.

South Korea has 29 domestic crypto exchanges, including Upbit, which ranks 13th globally in trading volume according to CoinGecko. The new regulations could significantly impact South Korea's crypto market. With altcoins making up over 60% of trading volume, the measures might lead to a substantial reduction in the local market. Coins with low trading volumes and poor disclosure practices are likely to be delisted first.

South Korea's review of 600 cryptocurrencies is part of a broader effort to tighten regulations and ensure compliance with new standards. The Virtual Asset User Protection Act, effective July 19, focuses on issuer reliability, security, and regulatory compliance. Regular reviews will enforce these standards, possibly leading to the delisting of non-compliant cryptocurrencies.

The new rules aim to protect users and improve market transparency and security. While this could stabilize and enhance the market environment, it may also result in the delisting of many altcoins, especially those with low trading volumes or poor disclosures. This shift shows South Korea’s commitment to creating a secure and reliable cryptocurrency ecosystem.

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