South Korea crypto market is bracing for a significant shakeup as financial authorities plan to rigorously reassess the listing status of nearly 600 cryptocurrencies traded on domestic exchanges. This move aims to ensure compliance with the recently implemented Virtual Asset User Protection Act, which takes effect on July 19, 2024.
The new regulations mark a shift from the current system, where individual exchanges conducted their own internal listing reviews. Under the stricter guidelines outlined in a finalized “best practice plan,” authorities will establish a centralized screening process with a focus on nine key criteria. These criteria include:
- Format suitability: Ensuring the cryptocurrency format is compatible with exchange listing.
- Issuer reliability: Assessing the credibility of the entity issuing the cryptocurrency through information disclosure practices and verifying coin circulation.
- User protection: Verifying the presence of robust user protection mechanisms, potentially including on-chain explorers for tracking white papers and blockchain activity.
- Technical security: Evaluating the cryptocurrency’s security posture by checking for a history of hacking incidents and requiring disclosure of smart contract source codes.
- Regulatory compliance: Confirming adherence to all domestic laws and regulations.
South Korea’s financial watchdogs will delve deeper into issuer reliability by examining information disclosure practices and verifying a cryptocurrency’s actual circulation. User protection will be a key focus, with authorities potentially mandating on-chain explorers to track white papers and blockchain activity, allowing users to make informed investment decisions.
Technical security will also be under a microscope. Cryptocurrencies with a history of hacking incidents or those that fail to disclose smart contract source codes will face delisting. Additionally, exchange-issued coins, privacy-focused coins that conceal transaction history, and any cryptocurrencies found to be violating existing regulations will be automatically barred from listing.
The new framework goes beyond just ticking boxes. Qualitative screening requirements are also under consideration, potentially including subjective and descriptive questions alongside multiple-choice queries to assess the overall quality of a cryptocurrency project. Meeting the formal requirements alone won’t guarantee a listing. Issuers will need to demonstrate comprehensive disclosure, a well-defined issuance and circulation plan, and a credible business history for their ventures.
Also Read: South Korea Says NFTs Can Be Crypto: New Rules Classify Fungible NFTs As Securities
This regulatory overhaul has the potential to significantly impact South Korea’s vibrant crypto market, which boasts 29 domestic exchanges, including the globally recognized Upbit (ranked 13th by trading volume according to CoinGecko data). With altcoins currently accounting for over 60% of the market’s trading volume, the new measures could lead to a substantial contraction. Cryptocurrencies with low trading volumes and inadequate disclosures are expected to be the first casualties of the stricter listing regime.
Only time will tell how extensively this cryptocurrency market correction will be. However, one thing is certain: South Korea’s crypto market is on the cusp of a significant transformation, with a stronger emphasis on investor protection and regulatory compliance.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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