South Korean Crypto Exchanges Set to Review Over 1,300 Tokens
In a move to bolster investor protection, South Korean crypto exchanges, working alongside the Digital Asset Exchange Alliance (DAXA), unveiled on July 2 a set of comprehensive guidelines for the re-evaluation of listed cryptocurrencies.
This initiative, slated to commence on July 19, coincides with the rollout of South Korea’s first regulatory framework designed specifically for crypto investor protection.
DAXA New Regulatory Guideline for South Korean Crypto Exchanges
These self-regulatory standards, developed by 20 South Korean crypto exchanges, introduce a comprehensive evaluation process for both existing and new cryptocurrencies.
According to the July 2 statement, 1,333 tokens currently traded in South Korea will undergo re-examination within a six-month grace period.
DAXA, however, believes mass delistings are improbable. This confidence stems from the fact that major exchanges have already been adhering to comparable standards.
South Korean cryptocurrency exchanges are set to reevaluate over 1,300 tokens! 🔄 The new standards aim to enhance transparency and compliance. While mass delisting is unlikely, expect increased scrutiny. Stay informed! 💡📊 #CryptoNews pic.twitter.com/XUubG4kCRM
— Chain Explorer (@ChainExplorer04) July 2, 2024
Under the new guidelines, new tokens will be scrutinized based on formal and qualitative requirements.
Some of these formal criteria include standards on issuers’ credibility, investor protection measures, security, and compliance.
Qualitative requirements, on the other hand, involve a comprehensive examination of various project-related factors.
To ensure transparency and fairness, South Korean crypto exchanges must establish independent decision-making bodies for token listings.
Additionally, all major listing and delisting decisions must adhere to the new rules. The decision-making process should be documented and preserved for 15 years, with reviews conducted every quarter.
This development carries significant weight, especially considering South Korea’s influential role within the global cryptocurrency market.
This influence is evident in data from Kaiko, which reveals that the South Korean Won reigned supreme as the most-used fiat currency for crypto trading in the first quarter of 2024.
Alignment with New Crypto Regulations
The new crypto regulations, set to be implemented before July 19, show the South Korean authorities’ efforts to protect investors from crypto bad actors and market instability.
In line with this, the country’s financial watchdog, the Financial Services Commission (FSC), approved an enforcement decree introducing comprehensive measures to safeguard users’ assets and combat fraudulent activities in the digital asset space.
[Press Release] The Financial Services Commission announced that the government approved a new legislative bill on the Enforcement Decree of the Act on the Protection of Virtual Asset Users at a cabinet meeting held on June 25. https://t.co/gwFozngToP
— Financial Services Commission – FSC Korea (@FSC_Korea) June 25, 2024
A cornerstone of the new regulations is the requirement for Virtual Asset Service Providers (VASPs) to separate customer deposits from operational funds.
This segregation of funds, along with the requirement to utilize reputable financial institutions for storage, was put in place to protect South Korean customers from potential losses in case of exchange insolvencies.
The decree also introduces stringent security protocols, mandating VASPs to store at least 80% of users’ digital assets in cold storage – offline systems renowned for their resilience against cyber threats.
Likewise, regulators still retain the authority to increase this threshold based on their assessment of a VASP’s security posture, further fortifying the protection of user assets.
The new regulations take aim at market manipulation and fraud, outlining strict penalties for those who violate the rules.
Those found guilty of exploiting the system could face imprisonment for at least one year or fines of five times their illicit gains.
Further strengthening this stance, VASPs gain the ability to restrict user deposits and withdrawals under specific conditions, adding an extra layer of security against illicit activities.
This commitment to investor protection is clearly demonstrated by recent crackdowns, including the apprehension of 19 individuals implicated in a social media crypto scam that defrauded over 300 investors of nearly $19 million.
South Korea hasn’t yet imposed taxes on crypto profits, but authorities are keeping a watchful eye, ready to counter any attempts to use crypto for tax evasion.
