Recent reports from local media indicate that the South Korean government has approved a new best practice plan for supporting virtual asset transactions. This plan introduces stringent new criteria for listing cryptocurrencies on domestic exchanges, replacing the current system where exchanges conduct their own internal reviews with a more rigorous government-established process.
The primary emphasis of the new regulations is on screening for cryptocurrency listings. Currently, exchanges independently review and list cryptocurrencies. However, under the best practice plan, authorities will set uniform standards that all listed cryptocurrencies must adhere to.
According to a financial authority official, exchanges will conduct biannual assessments to determine whether to continue supporting each virtual asset. Following this, subsequent reviews will be conducted every three months.
“It’s inevitable that transaction support will be suspended for virtual assets that fail to meet the maintenance standards,” the official emphasized.
Nine essential screening criteria are currently under consideration. These include assessing the suitability of cryptocurrency formats for listing, evaluating issuer reliability, ensuring the presence of user protection mechanisms, assessing technology security levels, and confirming compliance with domestic laws and regulations.
South Korean authorities will gauge issuer reliability through scrutiny of their information disclosure practices and verification of cryptocurrency circulation. To safeguard users, authorities will verify the ability of an on-chain explorer to track white papers and blockchain activity.
Updated Security Standards and Qualitative Criteria for Cryptocurrency Listings
In terms of technical security, cryptocurrencies must have a clean record free from hacking incidents and disclose their smart contract source codes. Moreover, coins and tokens issued directly by exchanges, those that obscure transaction histories, and any cryptocurrencies violating current laws will not qualify for listing.
Authorities are also contemplating qualitative screening criteria, which include subjective and descriptive assessments alongside multiple-choice inquiries.
However, fulfilling formal requirements alone does not guarantee listing status. Issuers must also exhibit thorough disclosure practices, present a sensible issuance and circulation strategy, and demonstrate a credible business track record.
In South Korea, even if a cryptocurrency meets all formal requirements, authorities reserve the right to scrutinize its listing based on qualitative criteria. However, exceptions may apply for assets with a proven track record of trouble-free trading for more than two years on reputable overseas exchanges.
South Korea hosts 29 local cryptocurrency exchanges, among them Upbit. According to CoinGecko, Upbit ranks 13th globally in terms of trading volume.
The upcoming regulatory changes in South Korea have the potential to heavily influence the country’s crypto market. With altcoins representing more than 60% of the trading volume, these stringent measures could result in a notable reduction in local market activity. Cryptocurrencies with low trading volumes and issues in their listing disclosures are likely to face delisting first.
