South Korea to reconsider hundreds of crypto listings under new law

South Korea is set to review the listings of more than 600 cryptocurrencies on domestic exchanges starting next month.

This action comes as the country implements the new Virtual Asset User Protection Act, which calls for stricter regulatory measures. Korean news outlet Dnews reports that financial authorities are in the final stages of finalizing practices for this review, which will begin on July 19.

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

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

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

Quarterly reviews and delisting risks

The new regulations state that crypto exchanges will conduct an initial review of each token to decide whether it should be maintained or delisted. Subsequently, this review will take place quarterly. Tokens deemed problematic will be designated as precautionary and possibly delisted.

An official from the financial authority noted,

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

Exchanges will have six months to determine whether to continue supporting existing crypto listings. Maintenance reviews will follow this period every three months, ensuring ongoing compliance with the new regulatory standards.

Best Practice Plan for Virtual Asset Transaction Support

Local media recently reported that the South Korean government has finalized a best practice plan for virtual asset transaction support. This plan outlines strict new requirements for listing cryptocurrencies on domestic exchanges, improving the current system where exchanges conduct internal review. The central focus of the new regulations is listing screening, with the aim of establishing uniform standards that all listed cryptocurrencies must meet.

An official from the financial authority explained that the review process will include verifying whether the cryptocurrency format is suitable for listing, assessing issuer reliability, ensuring user protection mechanisms, evaluating technology security levels and confirming compliance with local laws and regulations. Issuers’ trustworthiness will be scrutinized based on their information disclosure practices and the cryptocurrency’s circulation.

Technical security and qualitative criteria

In terms of technical security, cryptocurrencies must have no history of hacking incidents and make their smart contract source codes public. Additionally, cryptocurrencies issued directly by exchanges, those that hide transaction history and others that violate current laws will not be eligible for listing. Authorities are also considering qualitative screening requirements, including subjective and descriptive questions and multiple-choice inquiries.

Meeting the formal requirements alone will not guarantee a cryptocurrency’s listing status. Issuers must demonstrate comprehensive disclosure, a reasonable issuance and circulation plan and a credible business history. Despite meeting all formal requirements, South Korean authorities can still challenge a cryptocurrency’s listing based on qualitative criteria. Exceptions will be made for assets that have been traded for more than two years without issues on well-regulated overseas exchanges.