South Korea Boosts Crypto Safety Standards

• With the recent regulations on cryptocurrencies in South Korea, the market will see a reduction in many altcoins that need to be more transparent and secure.
• The exchanges have been required to conduct the initial assessment of the altcoins and the quarterly review that sets up the units to assess the coins’ stability, reliability, and security.
• SVAPA stands for Virtual Asset User Protection Act and its purpose is to put an end to cash-for-listing practices and enhance the credibility of the South Korean crypto market.

South Korean crypto exchanges are preparing to delist numerous altcoins this year as new regulations come into effect. The Virtual Asset User Protection Act, starting July 19, mandates stringent measures for altcoin listings on platforms like Upbit, Bithumb, Coinone, Korbit, and Gopax. This new law is expected to impact the entire cryptocurrency industry in South Korea, targeting around 600 altcoins.

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Regulators will require 29 platforms, including those without fiat Korean won (KRW) trading permits, to conduct an initial review of the altcoins they list. This process will determine whether these coins will be delisted or continue to be supported. Following the initial review, exchanges must perform quarterly assessments of the listed coins. Exchanges are also obligated to flag potentially risky tokens with cautionary notices before delisting them.

This legislation demands that such exchanges create specific departments to assess the safety, stability, and regulation of the provided tokens. It will involve analyses like social credit, development, issuance, disclosure, transparency, market cap, and conflict issues. For the decentralized projects including bitcoin and tokens related to the DAO, other screening criteria will be availed. Investors thus anticipate that Ethereum and XRP, among other major tokens, in addition to highly regulated market coins will not be included in these policies.

The new rules should significantly improve the transparency of operations in the crypto market and increase the level of security. They shall come up with severe penalties against the exchanges that accept to be provided with the assets for helping them facilitate transactions. This move is in light of previous cash-for-listings scams concerning ‘kimchi coins,’ being low-cap South Korean exchanges: unduly maligned.

Most of these changes have been anticipated to occur in the future, several years into the future to be precise. At the beginning of this year, hinting at the looming regulations, several large domestic exchanges actively began to remove hundreds of low-cap coins from their platforms. The South Korean authorities are also ready to introduce a special cryptocurrency division in the Financial Services Commission (FSC) – the country’s top financial watchdog, to regulate the industry and has issued new guidelines for non-fungible tokens to avoid their misuse.

These developments come as there is interest in the trading of cryptocurrencies in South Korea has been on the rise. However, the Korean won was ranked 3rd while the dollar came after the two, thereby being outcompeted by the Korean won in total crypto trading volume in the first quarter of 2024. This represents a shift in the regulation relevant to the market growth of cryptocurrencies in South Korea and the future, it is expected to improve the situation concerning the increased security of such market.

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