Two of South Korea’s four largest exchanges, Upbit and Bithumb, have phased out altcoins as they prepare for an upcoming regulatory overhaul. Upbit, Bithumb, Coinone and Korbit are collectively referred to as Korea’s “Big 4”.

On June 11, Upbit announced that it would remove the ramps for five tokens. The exchange also published a “watch list” of 25 tokens. On June 18, she struck off 24.

On June 17, Bithumb announced that he would end four token trading on July 5.

Tokens that have been removed from the list so far usually fall into one of the following categories categories: tokens listed on less than five exchanges, dark coins (privacy coins like monero), tokens directly issued by exchanges and tokens whose protocols are no longer developed.

On June 4, the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) held a meeting with leaders of the national crypto exchanges. During this meeting, they transmitted a set of “recommended guidelines” for exchanges in order to maximize their chances of having their registration validated.

These guidelines included instructions for submitting plans of operation that detail token assessment and listing protocols as well as the identification and treatment of scams, fraud and illegal trades.

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All crypto exchanges must register with the FIU by September 24, but the FIU has the power to reject requests from exchanges that do not meet certain conditions or are perceived to be too risky (in terms of money laundering or potential fraud). The exchanges appear to have interpreted the FIU’s “guidelines” as a set of de facto orders, which could explain the massive delisting over the past month. Given the current trend, write-offs are expected to continue through September 24.

In addition to the FIU, exchanges should also be concerned about their partnerships with domestic commercial banks. Stock exchanges must secure a banking partnership in order to qualify for FIU registration, and banks have the power to choose which exchanges they will work with. The Big 4 currently have banking partnerships, but these are currently under review as banks deliberate extending their contracts with crypto exchanges beyond September 24.

As of June 21, Upbit had 178 tokens available for trading. Bithumb had 178 and Coinone had 180. That’s up to six times the number of tokens listed by smaller competitors. Korbit has less than 40.

By comparing, Coinbase currently supports less than 100 tokens.

Until now, the exchanges have had a strong incentive to list as many tokens as possible: transaction fees. The more coins traded, the higher the volume of trade; the higher the volume of transactions, the higher the transaction fees earned. Because there is no legal procedure for listing coins, exchanges were able to list as many as they wanted.

The FSC estimates that the Big 4 recorded an average daily trading volume of 22 trillion won ($ 19.4 billion) in April 2021.

Koreans also tend to trade significantly more altcoins than some of their foreign counterparts. Last month CoinMarketCap estimated that bitcoin accounts for around 40% of transactions globally, but only 7% of transactions among Korean traders.

A former employee of a crypto exchange (who requested to remain anonymous) told CoinDesk Korea that “more than 90% of the volume of crypto exchanges in Korea is in altcoins,” which “prompts national exchanges to list as much as possible “.

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Bithumb listed 52 pieces in 2021; Coinone listed 39 of them. This means that for Bithumb to list 50 tokens in about 200 days, he should have listed one every four days. It doesn’t leave a lot of time to review each project.

Noh Woong-rae, a lawmaker from the Democratic Party of South Korea, criticized the exchanges for this type of “blind token list.”

“They listed a massive amount of questionable tokens only to suddenly take them off the list without providing a clear explanation, leaving investors in the dust,” Noh said.

“If authorities find evidence that exchanges have listed shady tokens knowing they would likely be written off later for short-term profit, I think that’s grounds for rejecting their FIU registration. “, added Noh.

The delisting announcements have caused the prices of many altcoins to fall by 50% or more, causing huge losses to retail investors.

So far, Upbit has written off 36 tokens in 2021. Bithumb has written off 10. Coinone and Korbit have written off three each respectively.