Recently, bithumb and upbit, the two largest crypto exchanges with the highest trading volume in South Korea, have taken off the shelves, suspended trading, or issued investment warnings for a variety of cryptocurrencies. Why?
On February 28, upbit suddenly announced that it would remove 17 cryptocurrencies from its shelves. The main reason why most encrypted assets on upbit are taken off the shelf is the lack of communication between cryptocurrency developers and exchanges.
As a general note to warn against cryptocurrency risks, the upbit team stated:
“Due to the communication difficulties with the project technical team, the relevant technical support may have problems. The liquidity is very small, which makes the coins / tokens vulnerable to price manipulation. Therefore, in order to protect investors, we issued an investment warning.”
Due to similar problems, bithumb also issued a “high-risk cryptocurrency” warning for a variety of cryptocurrencies, and later issued a statement.
The company pointed out: “according to bithumb’s’ high risk cryptocurrency selection policy ‘, bithumb has marked and declared popular (january16,2020) and cybermiles (january23,2020) as high-risk cryptocurrencies. Bithumb is continuing to monitor the eligibility of transaction currencies, but the reason why cryptocurrencies are designated as high-risk assets has not been resolved.”
Since the beginning of 2020, both upbit and bithumb have made the quality control of cryptocurrencies in the exchange a top priority.
Both companies have adopted a strict policy. If the developers of cryptocurrencies under review cannot solve the concerns of the exchange, the exchange will consider removing the corresponding cryptocurrencies from the shelves.
For example, the process adopted by upbit is to issue an investment warning, conduct a week-long review of cryptocurrencies, and then assess whether developers have made appropriate changes. If upbit believes that these issues have not been resolved, it will terminate its support for cryptocurrency transactions under review.
“After the issuance of the investment warning, upbit will take a week to conduct a thorough review of the cryptocurrency to decide whether to remove it from the shelf. If the reasons for the issuance of the investment warning are not satisfactorily resolved within the above period, upbit will issue a separate statement to announce the termination of transaction support,” the company said.
When an exchange decides to conduct a review process on whether to remove a cryptocurrency from its shelves, many factors will be taken into account. So far, upbit and bithumb have mentioned the following reasons for the removal of cryptocurrencies from the shelves:
1. cryptocurrency developers lack the willingness to communicate with the exchange on solving problems
2. lack of understanding of Korea’s cryptocurrency Market
3. developers are not active enough
4. the trading volume and the overall demand of local investors are too low
5. market or price manipulation
So what does this mean for the cryptocurrency market in South Korea? This may be a good move. The head exchange’s implementation of complex and comprehensive quality control may set a precedent in the industry, that is, cryptocurrencies that fail to meet the standards or provide sufficient support for the exchange may face the risk of being removed from the shelves.
The higher standards adopted by upbit and bithumb create a more operational environment for investors and exchanges, because they filter out cryptocurrencies with relatively low market demand, trading volume and developer activities.
Is this a broader overall trend?
The time point at which upbit and bithumb monitor the quality of cryptocurrency is also the node at which G20 countries call for the adoption of the latest guidance on cryptocurrency of the Financial Action Task Force (FATF).
FATF is a financial regulatory agency subordinate to G7 countries. It has asked G7 and G20 Member States to strengthen AML and anti terrorist financing policies against cryptoexchanges. In response to the call of FATF to implement a stricter regulatory framework, the exchange may start to take active actions to create a safer trading environment for investors.
In 2020, Hong Kong, Switzerland and Japan have adopted the guidelines issued by FATF to implement stricter policies for cryptocurrency exchanges and transactions themselves. However, although Japan is very strict with the new currency, it has not taken the initiative to take measures to remove the tokens in the trading like South Korea.
Responsible editor: CT