Why South Korea's top crypto exchanges are delisting cryptocurrencies on a large scale

Source/LongHash

Recently, Bithumb and UPbit, the two largest cryptocurrency exchanges in South Korea by trading volume, have taken decisions to delist, suspend trading, or issue investment warnings for a variety of cryptocurrencies. What is the reason?

On February 28, UPbit suddenly announced that it would delist 17 cryptocurrencies. The main reason for the delisting of most crypto assets on UPbit was the lack of communication between cryptocurrency developers and exchanges.

As a general note warning of the risks of cryptocurrency, the UPbit team said:

“Due to communication difficulties with the project’s technical team, there may be problems with technical support. Liquidity is minimal, which makes the coin/token vulnerable to price manipulation. Therefore, in order to protect investors, we have issued an investment warning.”

Due to similar issues, Bithumb also issued a warning about "high-risk cryptocurrencies" for various cryptocurrencies and later issued a statement.

The company noted:

“Bithumb has flagged and declared Populous (January 16, 2020) and CyberMiles (January 23, 2020) as high-risk cryptocurrencies in accordance with Bithumb’s ‘High-Risk Cryptocurrency Screening Policy’. Bithumb is continuing to monitor the eligibility of the trading currencies, but the reasons that led to the designation of the cryptocurrencies as high-risk assets have not been resolved.”

Since the beginning of 2020, both UPbit and Bithumb have made quality control of cryptocurrencies on their exchanges a top priority.

Both companies have adopted a strict policy that would allow exchanges to consider delisting cryptocurrencies if their developers fail to address the exchanges’ concerns.

For example, UPbit’s process is to issue an investment warning, review the cryptocurrency for a week, and then evaluate whether the developers have made appropriate changes. If UPbit believes that these issues have not been resolved, it will terminate trading support for the cryptocurrency under review.

“After issuing an investment warning, UPbit will conduct a thorough review of the cryptocurrency within one week to decide whether to delist it. If the reasons leading to the issuance of the investment warning are not satisfactorily resolved within the above period, Upbit will issue a separate statement announcing the termination of trading support,” the company said.

When an exchange decides to start a review process on whether to delist a cryptocurrency, many factors are taken into account. So far, UPbit and Bithumb have mentioned the following reasons for delisting a cryptocurrency:

1. Crypto developers lack the willingness to communicate with exchanges to solve problems

2. Lack of understanding of the cryptocurrency market in South Korea

3. Developers are not active enough

4. Trading volume and overall demand from local investors are too low

5. There are market or price manipulation issues

So what does this mean for the cryptocurrency market in South Korea? It could be a good move. The implementation of complex and comprehensive quality control by leading exchanges could set a precedent in the industry, where cryptocurrencies that don’t meet standards or don’t provide enough support for exchanges could face the risk of being delisted.

The higher standards adopted by UPbit and Bithumb create an easier operating environment for both investors and exchanges because they filter out cryptocurrencies with relatively low market demand, trading volume, and developer activity.

Is this a broader overall trend?

UPbit and Bithumb’s quality control of cryptocurrencies comes at a time when G20 countries are calling for the adoption of the Financial Action Task Force’s (FATF) latest cryptocurrency guidelines.

FATF, a financial regulatory body under the G7 countries, has asked G7 and G20 member countries to strengthen AML and counter-terrorism financing policies for crypto exchanges. In response to FATF’s call for a stricter regulatory framework, exchanges may begin to take proactive actions to create a safer trading environment for investors.

In 2020, Hong Kong, Switzerland, and Japan have all adopted the guidelines issued by the FATF to implement stricter policies on cryptocurrency exchanges and trading themselves. However, despite Japan’s strictness on listing new coins, the country has not taken the initiative to remove tokens from trading like South Korea.

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