South Korean crypto exchanges are bracing for significant changes as the country’s new Virtual Asset User Protection Act is set to come into force on July 19. This regulatory overhaul is expected to prompt exchanges to review and potentially delist around 600 altcoins from their platforms, marking a pivotal shift in the local crypto market landscape.

Impact of the Virtual Asset User Protection Act

The upcoming legislation mandates that South Korean exchanges like Upbit, Bithumb, Coinone, Korbit, and Gopax, which facilitate fiat KRW trading, adhere to stringent regulatory guidelines. These exchanges, along with over 20 others operating without KRW trading permits, will be required to evaluate and decide the fate of hundreds of altcoins listed on their platforms.

Regulators will initiate an initial review process for these exchanges, compelling them to assess the viability and compliance of each altcoin. This review will determine whether to continue supporting these assets or to issue cautionary notices leading to eventual delisting.

Obligations Under the New Law

Exchanges must establish dedicated units responsible for listing and delisting decisions. These units will assess various criteria including social credit, development status, issuance details, information transparency, market cap, and potential conflicts of interest. Quarterly reviews will be mandatory to ensure ongoing compliance with regulatory standards.

Special Considerations for Decentralized Projects

The law introduces alternative screening requirements for decentralized projects like Bitcoin and DAO-related initiatives. Established tokens such as Ethereum (ETH) and XRP may benefit from streamlined regulatory processes due to their global acceptance and adherence to stringent overseas regulatory frameworks.

International Cooperation and Stringent Oversight

South Korean regulators are seeking collaboration with financial authorities and investment banks in countries like the US, UK, Germany, and Japan to align regulatory efforts and enhance oversight of the crypto market. This international cooperation aims to mitigate risks associated with illegal activities such as short selling and enhance market integrity.

Addressing Past Controversies

Recent scandals involving cash-for-listing practices, particularly concerning low-cap "kimchi coins," have prompted regulatory crackdowns and increased scrutiny. Exchanges found accepting assets under questionable circumstances face severe penalties, reflecting efforts to restore trust and transparency in the local crypto ecosystem.

Anticipated Market Impact

The impending delisting decisions and regulatory adjustments are expected to reshape the South Korean crypto market significantly. Market participants, including investors and traders, are closely watching developments as exchanges prepare for compliance with the new regulatory framework.

Conclusion

As South Korea prepares to implement the Virtual Asset User Protection Act, the crypto industry faces a pivotal moment with potentially far-reaching implications. The regulatory changes underscore the government’s commitment to enhancing investor protection, promoting market transparency, and ensuring sustainable growth in the cryptocurrency sector.