Crypto Delistings in South Korea Soar to 34.9%: Key Insights

The crypto landscape in South Korea remains a hot topic, primarily due to high rates of delisting and the associated financial risks for investors. Over the last seven years, 34.9% of cryptocurrencies listed on South Korean exchanges have been delisted, with a staggering half failing to last beyond two years.

Initial listings tend to generate short-term price increases driven by heightened investor interest and demand, but the long-term outlook for these assets is often much less promising.

South Korean Investors Face Crypto Delistings

This phenomenon is concerning for investors who may hastily purchase new coins after a listing, anticipating continuous growth. A common trend unfolds where a coin experiences a price surge shortly after being listed, fueled by excitement and hype, particularly among retail investors.

However, many cryptocurrencies struggle to sustain this initial momentum and subsequently decline in value. Eventually, they get delisted from exchanges.

“…analysis from January 2018 to August 2024 revealed that 517 (34.9%) of the 1,482 virtual assets listed on exchanges were delisted… The average duration before delisting for these 517 assets was 748 days (2 years and 18 days). Notably, over half (54.0%) of these assets (279) were delisted in less than two years, while 107 (20.7%) did not last even one year,” local Korean media reported.

The issue is exacerbated by the reality that cryptocurrency listings and delistings in South Korea, like elsewhere, largely lie within the discretion of the exchanges. Although South Korea introduced the Virtual Asset User Protection Act in July 2023 aimed at protecting digital asset investors, it has yet to establish clear criteria for the listing or delisting processes.

Read more: 17 Best No KYC Crypto Exchanges: Top Choices in 2024

This regulatory void empowers exchanges to list and delist cryptocurrencies according to their internal policies. Major trading platforms, including Binance, determine their own criteria for listing and delisting tokens.

“At Binance, we routinely evaluate each digital asset we offer to ensure it meets our high standards and industry benchmarks. If a coin or token fails to meet these criteria or if there are significant shifts in the industry landscape, we undertake a detailed assessment and may choose to delist it,” Binance stated.

This dynamic creates a setting where market volatility and investor risks remain elevated. Delistings, in particular, can devastatingly impact investors’ portfolios.

Once a cryptocurrency is delisted from an exchange, it becomes unavailable for trading on that platform. This results in a sharp decrease in liquidity, complicating the ability of investors to sell their holdings without incurring substantial losses.

In some instances, a delisted cryptocurrency may still be available on international platforms. Still, with much reduced demand, its price is likely to dive. This situation raises the question: what causes the high delisting rates in South Korea?

Factors Influencing Crypto Token Delistings

One key factor is that the South Korean crypto market is characterized by high speculation. Investors frequently chase quick profits through short-term trades rather than making long-term investments. Many newly listed cryptocurrencies lack solid business models or technological underpinnings, leading to poor performance once the initial excitement subsides.

Moreover, as global regulatory frameworks tighten, exchanges may delist cryptocurrencies that do not align with emerging compliance standards, including transparency in project management and user funds oversight. For example, Tether’s USDT is facing similar scrutiny in the European Union, where Coinbase plans to delist non-compliant stablecoins.

Amid these developments, local media have recently reported that the South Korean government has completed a best practice strategy for supporting virtual asset transactions. This plan introduces stringent new criteria for cryptocurrency listings on local exchanges, which will be bolstered by a more rigorous review process that complements the existing internal assessments conducted by exchanges.

“According to DeSpread, Upbit, South Korea’s largest exchange, typically does not list meme coins for two consecutive days. However, per the latest regulations, new meme coins must be traded for two years to qualify for a listing,” WuBlockchain reported.

Despite regulatory efforts, South Korean exchanges operate in a highly competitive landscape. The race to feature new and potentially profitable cryptocurrencies has intensified, as exchanges recognize that new listings can attract significant attention and liquidity, which are essential for their profitability.

However, without robust regulatory frameworks to ensure the viability of listed cryptocurrencies, investors face considerable risks. The uncertainty surrounding delistings serves as a stark reminder to many investors of the perils present in the cryptocurrency market.

While the initial price surge that follows a listing can be enticing, the long-term outlook often remains unclear. Thus, the potential for capital loss is substantial if the coin underperforms, thereby heightening the probability of delisting.

Read more: Crypto Regulation: What Are the Benefits and Drawbacks?

The high turnover rate of coins on South Korean exchanges indicates that only a small fraction of newly listed cryptocurrencies endure the test of time. Investors in South Korea should proceed with caution, ensuring they conduct thorough research into any cryptocurrency’s project, team, and technological basis before investing as a means of mitigating future losses.

Nonetheless, given the unpredictable nature of the market, there is no guaranteed strategy to sidestep the risks linked with investing in new cryptocurrencies.