South Korea Plans to Reassess 600 Cryptocurrency Listings on Domestic Exchanges

South Korea’s financial authorities are set to reassess the listing of approximately 600 cryptocurrencies traded on domestic exchanges to ensure compliance with new regulations under the Virtual Asset User Protection Act, effective July 19. This move comes as the government finalizes a best practice plan for virtual asset transaction support, outlining strict new requirements for listing cryptocurrencies on domestic exchanges. This plan aims to supplement the current system, where exchanges conduct their own internal reviews, with a stricter review process established by the authorities.

The central focus of the new regulations is listing screening, with authorities establishing standards that all listed cryptocurrencies must meet. Exchanges will now be required to review whether to maintain transaction support for each virtual asset every six months, with subsequent reviews occurring every three months. Exchanges that do not meet the standards for maintaining transaction support may have their support suspended for virtual asset items. Nine key screening requirements are under discussion, including verifying cryptocurrency format suitability, assessing issuer reliability, ensuring user protection mechanisms, evaluating technology security levels, and confirming compliance with domestic laws and regulations.

South Korean authorities will assess issuers’ reliability by examining their information disclosure practices and verifying the cryptocurrency’s circulation. For user protection, authorities will check if an on-chain explorer can track white papers and blockchain activity. Additional security standards will also be implemented, with cryptocurrencies required to have no history of hacking incidents, disclose smart contract source codes, and not violate current laws. Qualitative screening requirements are also being considered, with subjective and descriptive questions in addition to multiple-choice queries.

Meeting formal requirements alone will not guarantee assets’ listing status. Issuers must also demonstrate comprehensive disclosure, a reasonable issuance and circulation plan, and a credible business history. Even if a cryptocurrency meets all formal requirements, South Korean authorities may still challenge its listing based on qualitative criteria. However, exceptions exist for assets that have been traded without issues for over two years on well-regulated overseas exchanges. With 29 domestic crypto exchanges in South Korea, including Upbit which has the 13th-highest trading volume globally according to CoinGecko data, the regulatory overhaul could significantly impact the country’s crypto market.

The new measures may lead to a substantial contraction of the local crypto market, given that altcoins account for over 60% of the market’s trading volume. Coins with low trading volumes and problematic listing disclosures are expected to be the first to be delisted as a result of the stricter review process established by authorities. It is important for cryptocurrency issuers and exchanges in South Korea to ensure compliance with the new regulations to avoid potential delisting, as the government aims to enhance user protection and maintain the integrity of the crypto market in the country.