Crypto exchanges operating in South Korea are said to be preparing for an internal audit. As part of this process, more than 600 cryptocurrencies will reportedly be re-examined to see if they meet the regulatory standards set by Seoul. The goal is to protect South Korea’s investor community as well as its financial ecosystem from the risks posed by unregulated and volatile crypto assets. Exchanges will also conduct a maintenance review of their companies to identify any security or cyber threat that could threaten their businesses, according to the report.
South Korea to identify risk tokens
A total of 29 crypto exchanges operate in South Korea, including Upbit, Bithumb, Coinone, Korbit and Gopax. The decision by these exchanges to conduct an audit of crypto tokens listed for trading on these exchanges is influenced by the Virtual Asset User Protection Act, which is set to go into effect on June 19 in South Korea, S.Korean publication Chosun reported.
Exchanges will reportedly remove crypto tokens that do not meet regulatory standards. Exchanges are then said to provide delisting information to their user communities. Crypto tokens listed less than six months ago are said to be given a stern warning to comply with the country’s legal requirements before facing delisting.
“We will allow virtual asset exchanges to review whether to maintain trading support for traded virtual asset items 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 as saying.
Token review process
Crypto exchanges preparing to conduct this internal investigation have reportedly outlined important points to cover to ensure all crypto assets are safe for investors. Audits for these tokens will be conducted according to security, technology level, regulatory compliance, transaction support and past business history.
The transparency of the virtual asset’s operation, market capitalization, as well as the total volume of issuance and circulation are other parameters related to the more than 600 tokens that exchanges are said to analyze. Exchanges will reportedly establish an alternative verification method for cryptocurrencies issued by decentralized organizations (DAOs) — which could be difficult to trade in South Korea.
Furthermore, South Korea’s Virtual Asset User Protection Act directs all exchanges to conduct internal maintenance reviews every three months.
South Korea is cracking down on risky crypto habits
The Asian nation has been quite pro-crypto in its approach to the digital asset sector despite the risks associated with it. With South Korean banks tapping into the metaverse ecosystem to get authorities to approve licenses for crypto companies looking to set up shop there – the nation has taken many pro-Web3 steps. The country categorized blockchain-based tokens as ‘securities’ back in February 2023, placing them under its securities laws.
However, it is notable that the government there has remained vigilant in terms of monitoring industry players involved in the virtual assets sector. In April 2022, authorities conducted investigations into exchanges such as KuCoin and Coinex to verify whether their operations were legal or not.
In January 2024, South Korean authorities reportedly said that buying cryptocurrencies via credit cards could soon be banned in South Korea.
