South Korean Crypto Exchanges Prepared to Review More Than 1,300 Tokens
Jimmy Aki Last updated: July 2, 2024, 12:51 EDT | 2 min read 
In a bid to enhance investor safeguards, South Korean cryptocurrency exchanges, in collaboration with the Digital Asset Exchange Alliance (DAXA), revealed on July 2 a comprehensive set of guidelines for reassessing the cryptocurrencies listed on their platforms. This initiative, scheduled to kick off on July 19, aligns with the introduction of South Korea’s initial regulatory framework specifically tailored to protect cryptocurrency investors.
DAXA’s Novel Regulatory Guidelines for South Korean Crypto Exchanges
These self-regulatory standards, crafted by 20 South Korean crypto exchanges, introduce a thorough evaluation process for both current and prospective cryptocurrencies. As per the July 2 announcement, 1,333 tokens presently traded in South Korea will undergo re-evaluation within a six-month grace period. However, DAXA is confident that widespread delistings are unlikely, given that major exchanges have already been complying with similar standards.
Under the new guidelines, incoming tokens will be assessed based on formal and qualitative criteria. Formal standards encompass aspects such as issuers’ credibility, investor protection mechanisms, security protocols, and regulatory compliance. On the other hand, qualitative requirements entail a comprehensive review of various project-related elements. To ensure transparency and equity, South Korean crypto exchanges must establish independent decision-making bodies for token listings. Furthermore, all significant decisions regarding listings and delistings must abide by the new regulations. The decision-making procedures should be documented and retained for 15 years, with reviews conducted quarterly.
This development holds considerable significance, especially given South Korea’s pivotal role in the global cryptocurrency market. This influence is underscored by data from Kaiko, revealing that the South Korean Won was the most used fiat currency for cryptocurrency trading in the first quarter of 2024.
Adherence to New Crypto Regulations
The forthcoming crypto regulations, slated for implementation before July 19, underscore the South Korean government’s commitment to shielding investors from fraudulent activities and market volatility within the digital asset realm. In line with this, the nation’s financial oversight body, the Financial Services Commission (FSC), greenlit an enforcement decree introducing comprehensive measures to protect users’ assets and combat fraudulent behaviors in the digital asset sector.
A central tenet of the new regulations is the mandate for Virtual Asset Service Providers (VASPs) to segregate customer deposits from operational funds. This fund separation, coupled with the requirement to utilize reputable financial institutions for storage, aims to safeguard South Korean customers from potential losses in cases of exchange insolvencies. The decree also mandates stringent security protocols, requiring VASPs to store a minimum of 80% of users’ digital assets in cold storage—offline systems noted for their resilience against cyber threats. Moreover, regulators retain the authority to raise this threshold based on their assessment of a VASP’s security posture, strengthening the protection of user assets further.
The new regulations target market manipulation and fraud, outlining strict penalties for offenders. Perpetrators of system exploitation could face imprisonment for at least one year or fines amounting to five times their illicit gains. Further reinforcing this stance, VASPs are empowered to restrict user deposits and withdrawals under specific conditions, adding an extra protective layer against illicit activities. This strong commitment to investor protection is exemplified by recent crackdowns, including 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 yet to impose taxes on crypto profits, authorities are vigilant and prepared to thwart any attempts at using cryptocurrency for tax evasion. Follow Us on Google News.
