Altcoins Delisted in South Korea, Exchanges Brace for Impact

South Korea’s cryptocurrency sector will witness a significant disturbance as regulators prepare to enforce regulations aimed at protecting crypto investors. The Virtual Asset User Protection Act, set to take effect on July 19, will involve a review of the altcoins listed on the nation’s crypto exchanges. In anticipation of these measures, exchanges began purging low-cap “kimchi coins” from their platforms as early as 2021.

South Korea Regulators to Force Delisting

The Daehan Kyungjae newspaper recently reported that starting next month, regulators will scrutinize transaction support for approximately 600 altcoins across various virtual asset exchanges.

The act’s will mandate compliance from all fiat KRW-trading platforms, including major exchanges such as Upbit, Bithumb, Coinone, Korbit, and Gopax. Over 20 other exchanges that have yet to obtain KRW trading permits and currently offer only crypto-to-crypto pairs will also be subject to these new regulations.

29 Platforms Required to Conduct Altcoin Reviews

In total, 29 platforms will be required to conduct initial reviews to decide whether they will continue to support or delist the 600 altcoins currently listed. Furthermore, these exchanges will have to carry out quarterly reviews of the coins on their platforms, issuing cautionary notices for potentially risky tokens before delisting them.

An unnamed regulatory official explained the process to the media outlet: “For coins that are currently being traded, we will support exchanges as they review their support over a six-month period. After that, they will have to conduct maintenance reviews once every three months.”

Dedicated Listing and Delisting Units 

Under the new law, exchanges must establish dedicated listing and delisting units tasked with evaluating the security, reliability, and compliance of the coins they offer. These teams will assess various factors, including social credit, development, issuance, information disclosure, transparency, issuance and distribution volumes, market cap, conflict of interest-related matters, and other potential risks.

Interestingly, for Bitcoin and DAO-related tokens, “alternative screening requirements” will be provided. However, big-name tokens like Ethereum (ETH) and XRP are expected to be exempt from these protocols, given their established reputations and regulatory histories.

Strict Penalties for Exchanges

Additionally, coins that have been traded for more than two years in overseas markets with stringent regulatory systems, including the United States, the United Kingdom, France, Germany, Japan, Hong Kong, Singapore, India, and Australia, are likely to be given the green light without stringent review.

The new regulations also come with strict penalties for exchanges that accept assets in exchange for enabling transaction support, addressing longstanding concerns over cash-for-listings scandals.