Exchanges will then be required to conduct an initial review to determine whether to continue supporting the trading of the cryptocurrencies currently listed on their platforms.
Following the implementation of the Virtual Asset User Protection Act in South Korea, the country’s financial authorities must examine whether to maintain trading for about 600 altcoins listed on crypto exchanges.
South Korea’s government plans to release a set of rules for how companies that trade virtual assets should operate. This will happen after a new law called the Virtual Asset User Protection Act is enacted on July 19. The guide containing the rules will be given to 29 exchange companies that provide virtual asset buying and selling services. Some of the major exchanges that will get the guide are Upbit, Bithumb, Coinone, Korbit, and Gopax.
These exchanges will then be required to conduct an initial review to determine whether to continue supporting the trading of the cryptocurrencies currently listed on their platforms.
Quarterly Reviews and Delisting: Ensuring Investor Safety and Market Integrity
Subsequently, the South Korean financial watchdog will require exchanges to perform regular assessments of their crypto trading instruments every quarter. If, in the process, they notice or identify potentially risky cryptocurrencies, they are required to place cautionary notices on these tokens before eventually delisting them.
Also, six months will be given to exchanges to review currently traded coins and determine whether to maintain trading support. According to an unnamed official, “for coins that are currently being traded, we will support exchanges to review whether to maintain trading support over a six-month period, after that, maintenance reviews will be conducted once every three months.”
Based on the new regulation, cryptocurrency exchanges will be required to properly assess the virtual assets listed on their platforms and examine factors such as reliability, security, and compliance with laws and regulations. Specific criteria include:
- Capability and social credit of entities
- Disclosure of key information
- Ability of asset holders to participate in decision-making
- Transparency of virtual asset operations
- Total issuance and distribution volume, as well as market capitalization
- Conflict of Interest
- Security of distributed ledgers and virtual assets
- Concentration risks in distributed ledgers
An alternative screening method will be introduced to address cases where the issuing entity is not clearly defined, such as Bitcoin or coins from decentralized autonomous organizations (DAOs).
However, virtual assets that fall into the alternative screening procedure, especially those traded in overseas markets such as the United States, France, and Japan, amongst others with stringent regulatory measures, will be exempt from some of the requirements.
Additionally, the new law prohibits exchanges from accepting any valuable property in exchange for providing trading support.
South Korea’s new Virtual Asset User Protection Act is an important change that means the government will watch cryptocurrency exchanges more closely. It will further protect investors and traders alike, ensuring that the market is fair and safe from fake crypto coins.
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