South Korean Crypto Exchanges to Reassess Over 1,300 Tokens Amid New Regulatory Push

South Korean Crypto Exchanges to Reassess Over 1,300 Tokens Amid New Regulatory Push

In a concerted effort to enhance investor protection, South Korean crypto exchanges, in collaboration with the Digital Asset Exchange Alliance (DAXA), announced on July 2 a comprehensive set of guidelines for the re-evaluation of cryptocurrencies. This significant initiative is set to begin on July 19, coinciding with the introduction of South Korea’s first regulatory framework aimed specifically at safeguarding crypto investors.

DAXA’s Comprehensive Guidelines for Crypto Evaluation

Twenty South Korean crypto exchanges have developed these self-regulatory standards, which establish a thorough evaluation process for both existing and new cryptocurrencies. According to the announcement, 1,333 tokens currently traded in South Korea will undergo a re-examination during a six-month grace period.

Despite the large number of tokens under review, DAXA anticipates that mass delistings are unlikely, as major exchanges have already been adhering to similar standards. The new guidelines will evaluate new tokens based on both formal and qualitative criteria, including issuer credibility, investor protection measures, security, and compliance, as well as a detailed examination of project-related factors.

To ensure transparency and fairness, South Korean crypto exchanges must form independent decision-making bodies for token listings. All major listing and delisting decisions must comply with the new rules, with documentation preserved for 15 years and quarterly reviews conducted.

South Korea’s Role in the Global Crypto Market

This development is particularly significant given South Korea’s prominent role in the global cryptocurrency market. Data from Kaiko indicates that the South Korean Won was the most-used fiat currency for crypto trading in the first quarter of 2024.

Alignment with New Crypto Regulations

The upcoming regulations, set to be enforced before July 19, demonstrate the South Korean authorities’ commitment to protecting investors from fraudulent activities and market instability. The Financial Services Commission (FSC) has approved an enforcement decree introducing comprehensive measures to safeguard user assets and combat fraud in the digital asset space.

Key provisions include the requirement for Virtual Asset Service Providers (VASPs) to separate customer deposits from operational funds, ensuring the protection of customer assets in case of exchange insolvencies. VASPs must also store at least 80% of users’ digital assets in cold storage, with regulators retaining the authority to increase this threshold based on security assessments.

The new regulations also target market manipulation and fraud, imposing strict penalties for violations, including imprisonment for at least one year or fines up to five times the illicit gains. VASPs can restrict user deposits and withdrawals under specific conditions to prevent illicit activities.

Commitment to Investor Protection

This commitment is further evidenced by recent crackdowns, such as the arrest of 19 individuals involved in a social media crypto scam that defrauded over 300 investors of nearly $19 million. While South Korea has not yet imposed taxes on crypto profits, authorities remain vigilant against potential tax evasion via cryptocurrencies.

In summary, South Korea’s proactive approach in revising and enforcing crypto regulations aims to foster a safer and more transparent trading environment, reinforcing the country’s influential role in the global cryptocurrency market.

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