South Korea will re-evaluate hundreds of cryptocurrency quotes under new law

South Korea intends to review the listings of over 600 cryptocurrencies on national exchanges starting next month.

This action comes as the country implements a new law on the protection of users of virtual resources, which imposes more stringent regulatory measures. Korean news site Dnews reports that financial authorities are in the final stages of finalizing practices for these reviews, which will begin on July 19.

Under the new law, nearly three dozen registered cryptocurrency exchanges in South Korea, including Upbit, Bithumb, Coinone, Korbit and Gopax, will be required to establish audit committees. These committees will evaluate various aspects of each token, such as the credibility of the issuing entity, user protection measures, technology and security standards, and regulatory compliance. The aim is to ensure that all tokens listed meet the rigorous standards set by the authorities.

In addition to the basic criteria, exchanges must consider the issuer’s reputation, business history, transparency of disclosure, total supply and turnover, market capitalization and any potential conflicts of interest. Tokens issued by decentralized autonomous organizations (DAOs) may face challenges in meeting these standards.

However, tokens that have been traded without problems for more than two years on regulated markets such as the US, UK, France, Germany, Japan, Hong Kong, Singapore, India and Australia will be subject to a less stringent review process.

Quarterly reviews and the risk of delisting

The new regulations state that cryptocurrency exchanges will conduct a preliminary review of each token to decide whether to maintain or delist it. Thereafter, these reviews will take place quarterly. Tokens deemed problematic will be flagged as warnings and potentially removed from the list.

An official of the financial authority noted that

“It is inevitable that transaction support will be suspended for virtual asset items that do not meet transaction support maintenance standards.”

Exchanges will have six months to evaluate whether to continue supporting existing cryptocurrency listings. Maintenance inspections will occur every three months thereafter, ensuring continued compliance with new regulatory standards.

A best practice plan for supporting virtual asset transactions

Local media recently reported that the South Korean government has finalized a best practice plan to support virtual asset transactions. The plan sets stringent new requirements for cryptocurrency listings on national exchanges, streamlining the current system in which exchanges conduct internal assessments. The main goal of the new regulations is to check quotations, with the aim of establishing uniform standards that all listed cryptocurrencies must meet.

An official of the financial authority explained that the review process will include verifying whether the cryptocurrency format is suitable for listing on an exchange, assessing the credibility of the issuer, ensuring user protection mechanisms, assessing the security level of the technology and confirming compliance with national laws and regulations. The credibility of issuers will be checked based on their information disclosure and cryptocurrency trading practices.

Technical safety and quality criteria

In terms of technical security, cryptocurrencies cannot have a history of hacking incidents and leak the source codes of smart contracts. Additionally, cryptocurrencies issued directly by exchanges, those that hide transaction history and others that violate applicable regulations will not be eligible for listing. The authorities are also considering qualitative selection requirements, including subjective and descriptive questions and multiple choice questions.

Merely meeting the formal requirements does not guarantee the status of a cryptocurrency on the list. Issuers must demonstrate full disclosure, a reasonable issuance and dissemination plan, and a credible business history. Despite meeting all formal requirements, the South Korean authorities may still question the listing of the cryptocurrency on the exchange based on qualitative criteria. Exceptions will apply to assets that have been traded without issue for more than two years on well-regulated foreign exchanges.