600 cryptocurrencies await South Korean regulatory review

South Korea’s financial authorities plan to reassess the quotations of approximately 600 cryptocurrencies traded on domestic exchanges.

The purpose of this rigorous review is to ensure compliance with new regulations resulting from the Act on the Protection of Users of Virtual Resources, which will enter into force on July 19.

Delisting concerns grow as South Korea tightens cryptocurrency regulations

Local media recently reported that the South Korean government has finalized a best practice plan to support virtual asset transactions. This plan sets out new, stringent requirements for the listing of cryptocurrencies on national exchanges. The current system, under which exchanges conduct their own internal reviews, will be complemented by a more rigorous review process established by the authorities.

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The main purpose of the new regulations is to check the lists. Under the current system, exchanges review and list cryptocurrencies individually. However, by implementing the best practices plan, the authorities will establish standards that all listed cryptocurrencies must meet.

A financial authority official explained that exchanges will review every six months whether to maintain trading support for each virtual asset. Subsequent reviews would then take place 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 added.

Nine key control requirements are discussed. These include verifying whether the cryptocurrency format is suitable for listing, assessing the credibility of the issuer, ensuring the presence of user protection mechanisms, assessing the security level of the technology and confirming compliance with national laws and regulations.

South Korean authorities will assess the credibility of issuers by examining their disclosure practices and verifying cryptocurrency trading. To protect users, authorities will check whether an on-chain explorer can track white papers and blockchain activity.

New security standards and quality criteria for cryptocurrency quotes

In terms of technical security, cryptocurrencies cannot have a history of hacking incidents and leak the source codes of smart contracts. Additionally, coins and tokens issued directly by exchanges, coins and tokens that hide transaction history, and other cryptocurrencies that violate applicable regulations will not be eligible for issuance.

Authorities are also considering requirements for qualitative screening. These include subjective and descriptive questions, as well as multiple choice questions.

Meeting formal requirements alone does not guarantee that the assets will be listed on the stock exchange. Issuers must also demonstrate full disclosure, a reasonable issuance and distribution plan, and a credible business history.

Even if a cryptocurrency meets all formal requirements, South Korean authorities may still question its inclusion on the list based on qualitative criteria. However, there are exceptions in the case of 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 data, Upbit has the 13th largest trading volume in the world.

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This regulatory change could significantly impact the cryptocurrency market in South Korea. Given that altcoins account for over 60% of the market’s trading volume, the new measures could lead to a significant contraction of the local cryptocurrency market. Coins with low trading volumes and problematic disclosures are expected to be removed from listings first.