South Korea Crypto Exchanges Prepare for New Investor Rules

South Korea's Cryptocurrency Exchanges Gear Up for New User Protection Rules

South Korea's major cryptocurrency exchanges are gearing up to comply with new user protection rules set to go into effect on July 19. In a bid to prevent immediate mass delistings of smaller digital assets, the Digital Asset Exchange Alliance, representing the industry, plans to review 1,333 altcoins over the next six months to ensure compliance with the impending regulations. The South Korean crypto market's significance is underscored by the won recently overtaking the dollar as the most used currency for crypto transactions, with approximately 10% of the population engaging in crypto trading, primarily in altcoins over Bitcoin. One of the factors prompting these new rules was the 2022 collapse of Do Kwon's Luna and TerraUSD tokens, resulting in over $40 billion in losses. Consequently, major South Korean exchanges like Upbit could potentially face increased operational costs due to these new compliance requirements.

Key Takeaways

• South Korean crypto exchanges will review 1,333 altcoins to ensure compliance with the new user protection laws.
• Immediate mass delistings of altcoins are unlikely in the short term, as indicated by the Digital Asset Exchange Alliance.
• The dominance of the won as the top currency for digital asset swaps underscores the significant role of the South Korean crypto market.
• The new Virtual Asset User Protection law aims to regulate risky crypto investments, partly in response to the Luna and TerraUSD collapse.
• Major South Korean exchanges, including Upbit, could experience increased operational costs due to the new regulations.

Analysis

South Korea's stringent crypto regulations, fueled by past market failures, are anticipated to bring stability to the volatile altcoin sector. While exchanges like Upbit might face short-term cost increases, they stand to gain long-term credibility. Investors, especially those favoring altcoins, could encounter reduced trading options but increased security. The won's pre-eminence in crypto transactions signals a robust domestic market, potentially influencing global crypto regulation trends.

Did You Know?

• Altcoins:
  • Definition: Altcoins refer to any cryptocurrency other than Bitcoin and are more popular than Bitcoin in South Korea, with approximately 10% of the population engaging in their trading.
• Digital Asset Exchange Alliance (DAEA):
  • Role: An industry group representing South Korea's major cryptocurrency exchanges.
  • Current Action: The DAEA plans to review 1,333 altcoins to ensure compliance with the new investor protection rules to prevent mass delistings.
• Virtual Asset User Protection Law:
  • Purpose: Designed to protect users in the cryptocurrency market, particularly in response to significant losses like those caused by the collapse of Luna and TerraUSD.
  • Impact: Imposes new compliance requirements on exchanges like Upbit, potentially increasing their operational costs.