South Korea’s Financial Supervisory Service (FSS) plans to tighten oversight of crypto trading platforms under its jurisdiction to eliminate fraudulent transactions.

In a July 4 notice, the regulator announced that local exchanges must establish a “continuous monitoring system for unfair transactions” and report “abnormal transactions” via a dedicated transmission line.

According to the notice:

“To ensure that virtual asset exchanges can smoothly fulfill their legal obligations, the Financial Supervisory Service has jointly prepared the ‘Abnormal Transaction Monitoring Guidelines’ with exchanges and supported the establishment and operation of a regular abnormal transaction surveillance system.”

The new system will go live on July 19, coinciding with the implementation of South Korea’s first regulatory framework for crypto investor protection, the Virtual Asset User Protection Act.

Mass token delisting unlikely

In a parallel development, the Digital Asset Exchange Alliance (DAXA) and 20 local exchanges have addressed fears of a possible token mass delisting with the “Best Practices for Supporting Digital Asset Transactions” guideline.

In their July 2 statement, DAXA stated that the guideline provides a framework for exchanges to review and delist digital assets. The guideline would allow a more lenient review plan for assets that have traded for over two years in “eligible overseas virtual asset markets with sufficient regulation.”

Earlier reports suggested that South Korean exchanges would review the listing of over 1,000 altcoins in the next six months to ensure regulatory compliance. This raised concerns within the crypto community about potential mass delistings of as many as 600 coins.

Meanwhile, these regulatory moves further reflect South Korea’s proactive approach to crypto regulation. The Asian country aims to set high standards for exchange operations and consumer protection, positioning it as a leader in managing the crypto industry’s challenges.

Market observers noted that the regulatory changes will enhance market stability, protect investors, and deter financial crimes in the crypto sector.

South Korea’s Financial Supervisory Service (FSS) has clarified its role regarding the rumored removal of numerous digital assets from local crypto exchanges

On June 17, reports emerged that the FSS had instructed registered crypto exchanges, including Upbit, Bithumb, and Gopax, to evaluate several tokens on their platforms. This directive aligns with the Virtual Asset User Protection Act, which mandates stringent compliance and regular assessments of listed tokens.

Under the new law, exchanges must follow stricter guidelines for token listings and reassess existing tokens biannually. They are required to evaluate the reliability of the issuing entity, user protection measures, technology, security standards, and regulatory compliance of these digital assets.

The legislation also enforces severe penalties for non-compliance, including a minimum one-year jail term or fines ranging from three to five times the illegal profits they generated from the venture. Consequently, investors worry that as many as 600 altcoins may face delisting during these reviews, triggering mass panic selling.

In response to these rumors, the FSS denied direct involvement in listing or delisting virtual assets on exchanges. The regulator emphasized that it is limited to establishing listing standards, not overseeing the review process. It stated:

“Financial authorities inspect virtual asset operators and do not directly review stocks. We participated [in the initial processes] because there was a request to provide support in creating best practices, but the announcements will be made by the exchange and DAXA.”

Additionally, there are reports that the FSS intends to create a new division dedicated to crypto regulation. This division would be responsible for policy development, regulatory oversight, and establishing a framework for the burgeoning sector.