“Delisted Here, Trading There”... Exchanges That Killed Coins Without Giving a Reason [Crypto Radar]

Reasons undisclosed for 1 in 10 delisted crypto assets
Other exchanges disclosed reasons for the same assets
Self-regulation cited as a problem... Calls grow for legal oversight

Delisting criteria vary from one domestic virtual asset exchange to another. Even for the same virtual asset, some exchanges disclose the reasons for delisting while others do not, and assets delisted on one exchange may continue to trade openly on another. Calls are growing for laws, rather than self-regulation, to govern the review of applications for trading support and the procedures for ending that support in order to prevent these problems.

[Image source: Yonhap News]

According to “An International Comparison of Virtual Asset Trading Support Termination Systems and Measures to Improve the System in Korea,” published in the Financial Supervisory Research journal by the Financial Supervisory Service on November 10, of the 448 notices of trading support termination (delisting) for virtual assets traded on the country’s five largest exchanges, including Upbit and Bithumb, from 2018 through the first half of this year, 49 (10.9%) did not disclose the reasons for termination.

The number of cases in which the reasons for termination were not disclosed was 25 at Bithumb, 21 at Coinone, two at Upbit, one at GOPAX and zero at Digital X (formerly Korbit). Notably, in 10 of Bithumb’s 25 cases, other exchanges had provided specific reasons for ending support for the same virtual assets. In other words, exchanges differed on whether they disclosed their reasons, even for the same assets.

According to data compiled by the Financial Services Commission, there were 11,175,000 user accounts eligible to trade in Korea as of the first half of this year. That means more than one in five people in the country had an account. In Korea, where the market is centered on individuals because corporate participation is restricted, ending support for a particular virtual asset deprives users of the opportunity to sell that asset on the exchange. In other words, individual investors bear the losses resulting from the termination of trading support.

Exchanges also differed in how much time they gave users to respond to such potential losses. The warning period is the time between an asset being designated as a cautionary item and the actual termination of trading support. The median warning period was 41 days. Investors have to decide within those 41 days whether to sell the virtual asset. The warning period was just 17 days at Upbit, compared with 90 days at GOPAX, a significant difference.

The timing of trading support termination for the same virtual asset also varied. Among the 334 types of virtual assets listed in termination notices, there were 354 groups of the same assets for which support was terminated within 30 days. Only 54 of these assets (15.3%) were delisted jointly. Two assets were delisted jointly across all five exchanges, seven across four exchanges, 18 across three exchanges and 27 across two exchanges. A total of 300 delistings (84.7%) took place on a single exchange.

Procedures such as ending trading support differ from one exchange to another because they have not been governed by law in Korea and have instead remained subject to self-regulation. No legislation currently governs the review criteria, notification periods or procedures for initiating or ending trading support for individual virtual assets. The main laws concerning virtual assets, including the Act on Reporting and Using Specified Financial Transaction Information and the Act on the Protection of Virtual Asset Users, focus on regulations such as licensing requirements for businesses, anti-money laundering and the protection of user assets.

Unlike Korea, other jurisdictions regulate procedures such as the termination of trading support by law. Under the European Union’s Markets in Crypto-Assets Regulation (MiCA), exchanges must establish operating rules covering the approval of virtual assets for trading, trading support procedures, conditions for maintaining trading support and conditions for suspending trading. MiCA also grants supervisory authorities oversight and investigative powers. In Hong Kong, the Securities and Futures Commission (SFC) supervises exchanges under the Securities and Futures Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, and sets criteria for initiating and ending trading support in guidelines for operators.

Cho Kwang-hyun, an adjunct professor in the Department of Fintech and Blockchain at Dongguk University’s Graduate School, said, “Ending trading support is an important aspect of investor protection because it can limit users’ opportunities to sell their assets and result in losses.” He added, “The legal basis for regulation should be established and linked to supervisory enforcement: in the short term, the Act on the Protection of Virtual Asset Users should set out the grounds for the review criteria and procedures for approving, maintaining and ending trading support; in the long term, these should be covered by the Digital Asset Basic Act, which governs the virtual asset trading business.”

This content was produced with the assistance of AI translation services.