Violet Vallaya
Fueled by unsubstantiated rumors of a government crackdown, South Korea’s cryptocurrency market experienced a significant downturn this week. Major altcoins (alternative coins) witnessed double-digit price drops, rattling investor confidence and causing a ripple effect across domestic exchanges.
The panic selling began after reports surfaced online, alleging that the Financial Services Commission (FSC), the country’s financial watchdog, would be implementing stricter regulations. Local Korean media outlets, including EBN News, reported that the rumors claimed the FSC would conduct quarterly reviews of the roughly 600 altcoins listed on domestic exchanges. These reviews, the rumors continued, would result in the delisting of any coin failing to meet stringent listing maintenance standards.
However, the FSC swiftly moved to dispel these rumors. The commission clarified that it would not directly intervene in exchange listing decisions. Its role, they emphasized, is to supervise the operations of virtual asset service providers (VASPs), the companies that operate cryptocurrency exchanges.
“Financial authorities inspect virtual asset operators and do not directly review stocks. We participated because there was a request to provide support in creating best practices, but the announcements will be made by the exchange and DAXA,” The Financial Supervisory Service’s Virtual Asset Supervision Bureau said, as per EBN News.
The responsibility for coin listings and delistings, the FSC asserted, remains with the individual exchanges and industry bodies like the Digital Asset eXchange Alliance (DAXA).
Despite the FSC’s clarification, the damage was already done. Investors wary of stricter regulations and potential delistings began a wave of panic selling. Altcoins on major Korean exchanges like Upbit saw their values plummet. According to EBN News, nearly half of the altcoins on Upbit experienced price drops ranging from 10% to 20% within a single week.
This market downturn wasn’t limited to lesser-known altcoins. Even established players felt the sting. Ethereum (ETH), the world’s second-largest cryptocurrency by market capitalization, dipped by over 5% on Korean exchanges during the height of the panic. Bitcoin (BTC), the dominant cryptocurrency, remained relatively stable compared to altcoins, but still saw a slight decline in its value on Korean platforms.
Experts believe the incident highlights the vulnerability of the Korean crypto market to misinformation. South Korea boasts one of the world’s most active and enthusiastic cryptocurrency communities. However, this enthusiasm can sometimes translate into an overreaction to unverified rumors.
The episode also underscores the ongoing regulatory uncertainty surrounding cryptocurrencies in South Korea. While the FSC has implemented some regulations to combat money laundering and protect investors, the overall framework remains relatively unclear. This lack of clarity creates an environment where rumors can have a significant impact on market sentiment.
