South Korea’s financial regulators recently announced a major overhaul that could shake up the cryptocurrency market. From July 19, 2024, around 600 cryptocurrencies will be re-evaluated by local exchanges to ensure they meet new regulatory standards. This initiative, under the aegis of the Virtual Assets User Protection Act, could lead to the delisting of many non-compliant cryptocurrencies. Let’s find out the implications of this strict regulation and how it could reshape the crypto landscape in South Korea.
Strict new regulations
The regulatory context
The new Virtual Goods User Protection Act imposes strict compliance criteria for cryptocurrencies listed on South Korean exchanges. Financial authorities now require an initial review of cryptocurrencies, followed by checks every six months to verify their ongoing compliance with the new standards.
Compliance requirements
Review criteria include issuer reliability, technical security, compliance with national laws, and user protection. For example, cryptocurrencies must prove that they have not been involved in hacking incidents, and must disclose their smart contract source codes.
Potential consequences
A contracting market
This stringent review could result in a significant contraction of the South Korean cryptocurrency market. Currently, altcoins account for over 60% of trading volume, but the new measures could force the delisting of many of these cryptocurrencies, particularly those with low trading volumes or problematic disclosures.
Challenges for cryptocurrency issuers
Cryptocurrency issuers will now have to provide full disclosure, a reasonable issuance and circulation plan, and a credible trading history to maintain their listing on South Korean exchanges. Even if a cryptocurrency meets all the formal requirements, it could still be delisted if it fails to meet the regulators’ subjective qualitative criteria.
Outlook for the future
Strengthening investor confidence
Although this new regulation may seem harsh, it aims to boost investor confidence by ensuring that only the most reliable and secure cryptocurrencies remain available on the market. This could, in time, encourage a more secure and transparent trading environment.
Global impact on Crypto regulations
South Korea’s proactive approach could inspire other countries to adopt similar measures to regulate the cryptocurrency market. Cryptocurrency investors and issuers will need to keep a close eye on these developments and adapt to the new requirements to remain competitive on the global market.
Conclusion
The revaluation of 600 cryptocurrencies by South Korean exchanges marks a significant turning point in the regulation of digital assets. This initiative aims to protect investors and ensure compliance with the highest standards of security and transparency. As the market adapts to these changes, industry players will need to navigate carefully to comply and thrive in this new regulatory environment.
