The crypto exchanges operating in South Korea are said to be gearing up for an internal audit. As part of this process, over 600 cryptocurrencies will reportedly be re-examined to see whether they meet the regulatory standards laid out by Seoul. The aim is to protect South Korea’s investor community as well as its financial ecosystem against risks posed by unregulated and volatile crypto assets. The exchanges will also conduct a maintenance review of their respective firms in order to identify any security or cyber threat that may be looming over their businesses, as per the report.
South Korea to identify risky tokens
A total of 29 crypto exchanges operate in South Korea, which include Upbit, Bithumb, Coinone, Korbit, and Gopax among others. The decision of these exchanges to conduct audits of the crypto tokens that are listed for trading on these exchanges is influenced by the Virtual Asset User Protection Act, that is set to go under implementation on June 19 in South Korea, a report by S.Korean publication Chosun said.
The crypto tokens that fail to meet the regulatory standards will reportedly be delisted by exchanges. The exchanges are then said to provide information about the delisting to their respective user communities. Crypto tokens listed less than six months ago are said to get a strict warning to adhere to the country’s legal requirements before facing an expulsion from the trade lists.
“We will allow virtual asset exchanges to review whether to maintain trading support for virtual asset items that have been trading for six months. It is inevitable that transaction support will be suspended for virtual asset items that do not meet the standards for maintaining transaction support,” the Chosun report quoted an anonymous source familiar with the matter.
Process of Token review
Crypto exchanges getting ready to conduct this internal probe have reportedly chalked out important points to cover in order to ensure that all crypto assets are safe for investors to engage with. Audits for these tokens will be conducted along the lines of security, technology level, regulatory compliance, transaction support, and past business history.
Transparency of virtual asset operation, market capitalisation, as well as total issuance and circulation volume are other parameters linked to over 600 tokens said to be analysed by exchanges. The exchanges will reportedly establish an alternate screening method for cryptocurrencies issued by decentralised organisations (DAOs) — that may be difficult to be traded in South Korea.
Furthermore, the Virtual Asset User Protection Act in South Korea directs all exchanges to conduct internal maintenance reviews every three months.
South Korea cracking down on risky crypto habits
The Asian nation has been rather pro-crypto in its approach towards the digital assets sector despite the risks linked to it. With South Korean banks stepping into metaverse ecosystems to authorities approving licences for crypto firms looking to set up shop there – the nation has taken many pro-Web3 steps. The nation categorised blockchain-based tokens as ‘Securities’ back in February 2023, bringing them under its Securities laws.
It is however, notable, that the government there has remained vigilant in terms of overseeing industry players that are engaged with the virtual assets sector. In April 2022, the authorities conducted investigations on exchanges like KuCoin and Coinex to check if their operations were legal or not.
In January 2024, the South Korean authorities reportedly said that the purchase of cryptocurrencies through credit cards could soon be banned in South Korea.
