The heightened regulatory scrutiny recently affecting South Korea’s cryptocurrency space appears to have expanded to include exchange tokens.
Exchange tokens are tokens issued by a cryptocurrency exchange that usually provide some benefit to the holder, either through reduced trading fees, regular token burns, or other means.
According to a report by Arirang on Thursday, cryptocurrency exchanges are banned from handling self-issued coins or assets. The law also extends to all assets issued by family members, spouses or distant relatives and is expected to go into effect on June 26th.
Companies that fail to comply with the new regulations can cease operations and face fines of up to $ 88,000.
South Korea’s Financial Intelligence Unit (FIU) recently contacted 33 cryptocurrency trading platforms to inform them of an upcoming field consultation due by September 24th at the latest. In the week or so since then, a Korean exchange, Upbit, delisted a handful of coins and issued harsh investment warnings for an additional 25 assets, which represent 14% of all coins listed on the exchange.
In the future, Upbit will no longer accept incoming deposits for the 25 coins mentioned in the warning and has announced that it will continue to review the assets to decide whether or not to remove them from the list entirely. The deadline for the final decision on the tokens is Friday June 18th.
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South Korea’s attempts to get a better grip on the cryptocurrency industry within its borders have led regulators to require certificates for the information security management system of crypto trading platforms, which essentially act as an operating license. Out of 20 exchanges with the certificate, 11 have already removed tokens from the list or issued warnings similar to those from Upbit.
Since many exchange tokens do not run on a proprietary blockchain, the legal definition of what it means to “handle” tokens issued by an exchange may expand in the coming days and weeks as the coin purge continues in South Korea.