South Korea is on a mission to declutter its digital financial arena by reevaluating nearly 600 crypto assets listed on various local exchanges.
After the re-evaluation, the non-compliant cryptocurrencies will be delisted, i.e., they will not be traded on the exchanges anymore.
The officials have decided to embark on this mission from July 19, 2024. This delisting exercise is an effort to ensure the market’s compliance with the newly enforced Virtual Asset User Protection Act.
The re-evaluation of the terms and conditions for listing cryptocurrencies on local exchanges will make it mandatory to establish rules and regulations for monitoring the working of exchanges in addition to internal compliance attempts.
The state will now monitor the performance of each cryptocurrency, in addition to the exchange’s internal scrutiny.
South Korea’s Best Practice Plan for Regulating Cryptocurrency Exchanges
The best practice plan proposed by the government will mainly focus on screening the assets from the initial stages of its listing. So far the process of listing was overseen by the internal compliance processes of the concerned exchanges.
However, the newly established best practice plan will formulate regulations that all exchanges should follow during their listing process.
The authorities will screen the performance of the currencies every six months and will consider whether they should continue financial support for the certain currency.
The screening test will be conducted on the basis of nine criteria, which include verifying whether the cryptocurrency format is suitable for listing, assessing issuer reliability, ensuring the presence of protection mechanisms to safeguard user data, ensuring technology-powered security measures at all levels, and confirming compliance with domestic laws and regulations.
The reliability of the exchanges in issuing new coins is checked to learn the exchange’s coin disbursement patterns and verify their circulation.
Authorities are also contemplating the issuance of criteria for gaining accessibility through the introduction of an on-chain exchange where the investors can trace the trajectory of the financial journals and white papers of earlier times to today, and decide whether a particular coin will be profitable in the future.
New Technological And Security Standards
The listing and delisting of various cryptocurrencies will now be as per the rules and regulations given by the government. The assets will be protected from all types of hacking, crypto scams, and other security threats.
The coins and tokens issued directly by exchanges, coins, and tokens that do not show a detailed transaction history, and other cryptocurrencies violating current laws will be delisted.
The screening requirements will be made qualitative with the introduction of descriptive, subjective questions being asked during the screening process, in addition to the existing multiple-choice questions.
Issuers should also demonstrate a comprehensive disclosure of the various details regarding the listed currencies, a reasonable issuance and circulation plan, and a credible business history.
Even if a currency passes all these requirements, it will still be monitored for its quality. It will be delisted if the currency fails to show a commendable performance in the market.
However, those currencies that show an exceptionally good performance in the international market will be exempted from many of these regulatory criteria.
The Implications Of These New Regulations
The strict implementation of regulatory efforts in the cryptocurrency market of South Korea will result in more coins being scrutinized for their underperformance.
South Korea is home to about 29 cryptocurrency exchanges. Upbit is a famous exchange that has facilitated the boom of the Korean crypto market. It is the 13th largest exchange in the world.
The South Korean cryptocurrency market, with its significance to the decentralized financial sector of the world, is predicted to see contractions after the new regulations are implemented. Many of the underperforming currencies will be delisted, which will leave investors with less choice.
The Altcoins have a majority share in the cryptocurrency market. The altcoin’s dominance in the South Korean market will be toppled to an extent by these regulations.
The Bottom Line
South Korea’s strict regulatory measures focus on revamping its digital financial market. The market’s credibility will be enhanced with only high-performing coins being traded through its exchanges.
Even though these regulatory efforts will result in an initial contraction of the market, they will eventually lead to the restructuring of the market for good in the long term.
