South Korea introduces a new self-regulatory code for cryptocurrency exchanges, set to reevaluate over 1,300 tokens and enhance investor protection under the Virtual Asset User Protection Act.
Seol, Bollywood Fever: South Korea’s 20 cryptocurrency exchanges, along with their representative body, introduced a new code of conduct for local cryptocurrency firms on Tuesday. This initiative includes a reevaluation of over 1,300 cryptocurrencies currently traded on domestic platforms.
The newly released self-regulatory standards are scheduled to be enforced on July 19, coinciding with the implementation of South Korea’s first regulatory framework for crypto investor protection, according to the Digital Asset Exchange Association (DAXA) in a press release.
“If in the future a new cryptocurrency is to be listed, the exchange will need to examine the token on both formal and qualitative requirements,” the release stated, outlining the rules the industry alliance will impose on its member companies.
The formal requirements, which cover standards on issuers’ credibility, investor protection measures, security, and compliance, are non-negotiable. Tokens that fail to meet any of these criteria cannot be listed for trading. “Qualitative requirements consider and examine the project comprehensively across various factors,” the rulebook added. Reviews are to be conducted quarterly.
The new standards also require local exchanges to form an independent decision-making body for token listings, ensuring that major listing and delisting decisions adhere to the latest rules. The decision-making process for token listings must be documented and preserved for 15 years to enhance fairness and transparency, the release noted.
Reevaluating Existing Tokens
Existing crypto tokens currently traded on local exchanges will also undergo reexamination within a six-month grace period, the publication highlighted. By the end of 2023, there were 1,333 crypto tokens traded in South Korea. However, DAXA indicated that these examinations are unlikely to result in mass delistings of altcoins, as major crypto exchanges in South Korea have already been complying with these rules.
South Korea is home to one of the largest cryptocurrency markets globally, known for its significant altcoin activity. In the first quarter of 2024, the South Korean won was the most-used fiat currency for trading crypto, as per Kaiko data. Upbit, the country’s largest exchange, processed over $30 billion in crypto transactions in June, according to data from The Block.
The country’s inaugural crypto law, the Virtual Asset User Protection Act, aims to eliminate illicit market activities, such as using undisclosed information for crypto investments, manipulating market prices, and engaging in fraudulent transactions. It also mandates that crypto service providers safeguard over 80% of deposits in cold storage to protect user funds and enroll in insurance programs to compensate users in the event of security breaches.
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