Crypto in South Korea continues to attract attention due to high delisting rates and financial risks posed to investors. Over the past seven years, 34.9% of cryptocurrencies listed on South Korean exchanges have been delisted, with half surviving less than two years.
Although initial listings on these exchanges have often resulted in short-term price increases due to increased investor attention and demand, the long-term outlook is much less certain.
South Korean investors face cryptocurrency delistings
This trend is worrying for investors who might rush to buy new coins after a listing, expecting sustained growth. A typical pattern emerges where the coin experiences a price surge shortly after listing, driven by hype and enthusiasm, especially from retail investors.
However, many cryptocurrencies fail to maintain their momentum and see their value decline over time. Ultimately, they are delisted from the exchanges.
“…from January 2018 to August 2024, 517 (34.9%) of the 1,482 publicly traded virtual assets were delisted…The average listing period for the 517 delisted virtual assets was 748 days (2 years and 18 days) . However, more than half (54.0%) of them (279) did not last even two years and were written off. Meanwhile, 107 (20.7%) did not even last a year,” local Korean media reported.
The problem is compounded by the fact that cryptocurrency listings and delistings in South Korea, as in many other regions, remain largely at the discretion of exchanges. Although South Korea passed the Virtual Asset User Protection Law in July 2023, which aims to protect investors in the digital asset market, the law has not imposed clear standards for listing or radiation.
Read more: 17 Best No KYC Crypto Exchanges: Top Picks in 2024
This regulatory loophole gives exchanges the power to list and delist cryptocurrencies based on their internal criteria. Trading platforms, including industry giants like Binance, list and remove tokens based on their own valuations.
“At Binance, we periodically review every digital asset we list to ensure it continues to meet a high level of industry standards and requirements. When a coin or token no longer meets these standards or the industry landscape changes, we conduct further review and potentially delist it,” Binance noted.
Ultimately, this creates an environment in which market volatility and investor risks remain high. Delistings, in particular, have devastating effects on investors’ portfolios.
When an exchange delists a cryptocurrency, it essentially becomes inaccessible to trading on that exchange. This leads to a sharp decline in liquidity, making it difficult for investors to sell their securities without incurring significant losses.
In some cases, delisted cryptocurrency may continue to be traded on international platforms. However, with much lower demand, its price is likely to fall. So this begs the question: what is contributing to the high radiation rates in South Korea?
Factors Behind Crypto Token Delistings
On the one hand, the South Korean crypto market is highly speculative. Investors often seek quick profits through short-term trades rather than long-term holds. Because many newly listed cryptocurrencies lack strong business models or technological foundations, they perform poorly once the initial enthusiasm wears off.
Additionally, as new regulations emerge globally, exchanges could delist cryptocurrencies that do not meet emerging legal standards. These include transparency in project operations or the proper management of user funds. Tether’s USDT faces the same risk in the European Union as Coinbase plans to delist non-compliant stablecoins.
In this context, local media recently reported that the South Korean government has finalized a best practice plan for supporting virtual asset transactions. The plan outlines strict new requirements for listing cryptocurrencies on national exchanges. A stricter review process established by authorities will complement the current system, in which exchanges conduct their own internal reviews.
“According to DeSpread, Upbit, South Korea’s largest exchange, rarely listed the same coins for two consecutive days. However, according to the latest Korean regulations, new meme coins will need to be traded for two years before they can be listed,” WuBlockchain reported.
Despite the efforts of regulators, South Korean stock exchanges operate in a competitive environment. The race to list new, potentially lucrative cryptocurrencies has become intense. Exchanges know that new listings attract attention and liquidity, which is vital for their own profits.
However, without a strong regulatory framework ensuring that only viable cryptocurrencies are listed, investors are exposed to significant risks. For many investors, the uncertainty surrounding delistings serves as a reminder of the risks inherent in the cryptocurrency market.
Although the initial price rise following a listing may be tempting, the long-term outlook is often murky. As such, the risks of capital loss remain significant if the coin fails to perform, increasing the chances of delisting.
Read more: Crypto regulations: what are the advantages and disadvantages?
The high coin turnover rate on South Korean exchanges indicates that only a minority of newly listed cryptocurrencies stand the test of time. South Korean investors should exercise caution. Thoroughly researching the project, team, and technological underpinnings of the cryptocurrency before investing can provide some protection against future losses.
Nonetheless, the market is unpredictable and there is no surefire way to avoid the risks associated with investing in new cryptocurrencies.
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