Malaya Ruiz
The Digital Asset Exchange Association (DAXA), an industry body comprising five major South Korean exchanges, has revealed the details of its proposed assessment of 1,333 digital assets spanning six months in compliance with South Korea’s new investor protection laws, which will be enforced starting on July 19. This review, which has been in the pipeline for months, aims to mitigate potential mass delistings under the new regulations.
Twenty South Korean crypto exchanges, including leading platforms Bithumb and Upbit, are mandated to evaluate the cryptocurrencies listed on their platforms to follow the guidelines set forth by the Protection of Virtual Asset Users Act. Any new token listings must meet the requirements outlined in the new rules.
The review requirements are divided into four categories, namely, the reliability of the issuing entity, user protection devices, security standards, and compliance with laws and regulations.
Token issuers must disclose crucial information that may affect users’ investment decisions or the value of the digital asset, such as the total volume, distribution plan, and business plan. Additionally, they are not allowed to make changes without valid reasons.
The screening process should also focus on confirming the accuracy of materials, such as white papers, that address significant issues related to digital assets, and the ability to oversee transactions on the distributed ledger.
If there is a security breach, such as hacking, where the cause is unknown or unresolved, further evaluation is necessary. This could pertain to digital assets, crypto wallets managed by an entity, or a distributed ledger used for issuing, transmitting, or storing digital assets.
This stipulation in the initiative could prevent the occurrence of hacking incidents such as those that happened at the end of last year, which involved Galaxia (GXA), Orbit Chain (ORC), Somesing (SSX), and PlayDapp (PLA).
Stringent screening, such as requiring proper and sufficient documentation, will also be enacted on eligible overseas digital asset markets. Only markets located in countries that constitute the Board of Directors of the International Organization of Securities Commissions (IOSCO) are considered eligible. To ensure best practices are assumed in such cases, a list of eligible overseas markets will be identified through further research and discussions among exchanges and will be maintained with regular updates from DAXA.
This signals an important move toward protecting the overseas crypto holdings of the country’s citizens. As of September 2023, South Korean investors and businesses had accumulated more than 131 trillion won (around $97.9 billion) worth of cryptocurrencies in offshore accounts.
Crypto analyst Stefan Luebeck has optimistic views about this development, referencing Upbit’s significant trading volume in the first quarter of 2024 in a post on X. “This really is a strong headwind for the #cryptomarket, as @upbitglobal traders produced a lot of #tradingvolume in the first quarter of 24 in times being bigger than the whole trading volume on their local stock exchange,” he tweeted.
With South Korea’s crypto market adopting new regulations, investors must keep themselves abreast of possible shifts in token availability and market dynamics. The upcoming months will be critical in determining the direction of crypto trading in the region.
