In a decisive move to bolster the security and integrity of the cryptocurrency market in South Korea, financial regulators are set to introduce stringent guidelines for token listings on centralized crypto exchanges. Scheduled for release by the end of April or early May, these new regulations aim to tighten the scrutiny on digital assets and ensure better protection for investors.
According to News 1, a local media outlet, the forthcoming guidelines will prohibit the listing of digital assets on domestic exchanges if those assets have been compromised in hacking incidents, unless the cause of the breach has been conclusively identified and addressed. This measure underscores the authorities’ commitment to safeguarding investors from the risks associated with security vulnerabilities.
Furthering this protective stance, the guidelines stipulate that foreign digital assets seeking listing on South Korean exchanges must provide a white paper or technical manual specifically tailored for the South Korean market. This requirement aims to enhance transparency and ensure that investors have access to comprehensive information about the assets they are investing in.
However, there appears to be a grandfathering provision for tokens that have been listed on a licensed exchange for over two years, exempting them from these new criteria. This consideration might ease the transition for established digital assets and their investors.
The guidelines are also expected to mandate the delisting of cryptocurrencies if their issuers fail to disclose essential information accurately, such as discrepancies in the actual circulation volume compared to what is disclosed. This move is part of a broader effort to enhance market transparency and investor confidence.
These developments come in the wake of extensive consultations with the local crypto exchange industry and other stakeholders since late 2023, led by the Financial Supervisory Service. The Financial Services Commission, the primary regulatory body overseeing South Korea’s financial institutions and markets, has been instrumental in these efforts, reflecting a comprehensive approach to refining the regulatory framework for digital assets.
This regulatory tightening follows the enactment of revisions to the Virtual Asset Users Protection Act in early February, which introduced severe penalties for violations, including substantial fines and imprisonment. This legislative update was largely influenced by the fallout from the collapse of Terraform Labs and its digital currency, which had profound repercussions on the global crypto market.
Additionally, regional tax authorities, like the Gyeonggi Provincial Tax Justice Department, have leveraged digital tracking systems to unearth non-declared taxes from crypto accounts, underscoring the government’s commitment to enforcing tax compliance within the crypto sector.
The enhanced monitoring has already yielded results, with the Financial Intelligence Unit reporting a significant increase in flagged suspicious transactions in 2023. As the FIU embarks on its 2024 work plan, the South Korean government’s firm stance on crypto regulation is clear, aiming to establish a safer and more transparent market environment for investors and stakeholders.
