South Korea enforces stricter regulations on cryptocurrency exchange listings

South Korean financial regulators are set to introduce stricter guidelines for token listings on centralized cryptocurrency exchanges by the end of April or early May, according to reports from local media outlet News 1. The new regulations will prohibit the listing of digital assets that have been involved in hacking incidents on domestic exchanges, unless the root cause has been thoroughly investigated. Furthermore, foreign digital assets will only be allowed to be listed on domestic exchanges if a white paper or technical manual is published specifically for the South Korean market. However, tokens that have already been listed on a licensed exchange for more than two years may be exempt from these new requirements. The guidelines may also include a provision that requires exchanges to delist cryptocurrencies if the issuers do not adequately disclose important information, such as discrepancies between the actual circulation and the disclosed amount. The South Korean government is currently seeking feedback from local exchanges on these proposed guidelines. Since late 2023, the Financial Supervisory Service has been working on formulating the guidelines by gathering input from stakeholders, including the Digital Asset Exchange Association. The Financial Services Commission, a government agency responsible for overseeing and regulating financial institutions and markets in South Korea, will oversee the implementation of these guidelines. In early February, the South Korean government made updates to the Virtual Asset Users Protection Act, which introduced significant criminal penalties and fines for violations. These penalties include imprisonment of more than one year or fines of three to five times the amount of illegal profits. The legislation was prompted by a major industry crisis involving Terraform Labs and its founder, Do Kwon, a South Korean citizen. Terra’s collapse in May 2022 resulted in losses of over $450 billion. In an effort to crack down on tax evasion, the Gyeonggi Provincial Tax Justice Department implemented a digital tracking system for crypto accounts, which led to the collection of 6.2 billion won ($4.6 million) in undeclared taxes in 2023. The Financial Intelligence Unit of South Korea also reported a 49% increase in flagged suspicious transactions on domestic digital asset exchanges in 2023 compared to the previous year. These developments highlight the government’s efforts to strengthen regulation and oversight of the cryptocurrency market.