South Korean financial authorities have announced plans to introduce stricter regulations for token listings on centralized cryptocurrency exchanges. These new guidelines, set to be released by the end of April or early May, will prohibit the listing of digital assets involved in hacking incidents on domestic exchanges unless the root cause has been thoroughly determined. In addition, foreign digital assets can only be listed on domestic exchanges if a white paper or technical manual is published specifically for the South Korean market.
However, tokens that are already listed on a licensed exchange for over two years may be exempt from these new criteria. The guidelines may also require exchanges to remove cryptocurrencies from their listings if the issuers fail to adequately disclose essential information, such as discrepancies between the actual circulation and the disclosed amount.
The South Korean government is currently soliciting opinions from local exchanges as it formulates these listing guidelines. Since late 2023, the Financial Supervisory Service has been gathering feedback from stakeholders, including the Digital Asset Exchange Association, to ensure comprehensive regulations.
The Financial Services Commission, a government agency responsible for overseeing and regulating financial institutions and markets in South Korea, is actively involved in this process. Earlier this year, the government updated the Virtual Asset Users Protection Act to impose stricter penalties for violations, including fixed-term imprisonment of over one year or fines of three to five times the amount of illegal profits.
This legislation was prompted by a major industry crisis involving Terraform Labs and its founder, Do Kwon, a South Korean citizen. The collapse of Terra in May 2022 resulted in losses exceeding $450 billion.
In a separate development, the Gyeonggi Provincial Tax Justice Department implemented a digital tracking system for crypto accounts to tackle tax evasion. This system led to the collection of 6.2 billion won ($4.6 million) in non-declared taxes in 2023.
The Financial Intelligence Unit of South Korea has also reported a significant increase in flagged suspicious transactions by domestic digital asset exchanges. In 2023, 49% more suspicious transactions were identified compared to the previous year. The FIU recently outlined its 2024 work plan, emphasizing the importance of critical data and strategic initiatives for regulating the crypto market.
In the midst of these regulatory developments, Crypto.com continues to expand its operations in South Korea, despite increasing scrutiny from regulators.
As the crypto industry faces various challenges, one big question remains: How can Bitcoin payments make a comeback?