The countdown to July 19, 2025, has sparked intense speculation across South Korea’s booming crypto market. With rumors of mass delistings, regulatory crackdowns, and sweeping compliance checks swirling online, investors and traders are bracing for change. At the heart of it all is the imminent enforcement of the Virtual Asset User Protection Act, a landmark piece of legislation poised to reshape how digital assets are traded, monitored, and protected in one of the world’s most active crypto economies.
This article breaks down what the new law entails, how exchanges are preparing, and what it means for users, projects, and the broader market — all while separating fact from fear-driven fiction.
Regulatory Clarity Amid Market Panic
In mid-June 2025, whispers spread across Korean crypto communities: nearly 30 registered exchanges were allegedly instructed by regulators to review over 600 listed tokens, with up to 16 facing imminent delisting. The result? A sharp dip in prices across multiple韩元 (KRW)-paired altcoins, especially lower-market-cap tokens popular among retail traders.
However, on June 18, the Financial Services Commission (FSC) stepped in to clarify: it would not directly oversee individual token listings. Instead, the burden falls on exchanges themselves — a move toward industry-led self-regulation rather than top-down enforcement.
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This shift aligns with preparations for the Virtual Asset User Protection Act, set to take effect on July 19, 2025. To support compliance, the Financial Supervisory Service (FSS) announced on July 4 the creation of a 24/7 monitoring system designed to detect suspicious trading patterns such as abnormal volume spikes, price manipulation, or unusually slow execution speeds.
The goal? Identify high-risk accounts and ensure market integrity — not trigger panic-driven sell-offs.
DAXA’s 6-Month Reassessment: No Mass Delistings Expected
Enter DAXA — the alliance of South Korea’s five major crypto exchanges: Upbit, Bithumb, Korbit, Gopax, and Coinone. On July 2, DAXA unveiled a six-month reassessment plan covering 1,333 digital assets currently listed across its member platforms.
This initiative stems from the newly adopted Self-Regulatory Guidelines for Virtual Asset Trading Support, developed under guidance from financial regulators and expert consultation. These guidelines will be implemented alongside the Virtual Asset User Protection Act.
Key points:
- All 29 registered crypto exchanges in South Korea will evaluate whether their listed tokens meet new transparency, governance, and operational standards.
- The process will be phased, reducing the likelihood of sudden mass delistings.
- For overseas assets, DAXA is developing an alternative review framework: tokens traded for over two years on reputable international exchanges — particularly those recognized by the International Organization of Securities Commissions (IOSCO) — may qualify for expedited approval.
This structured approach aims to balance investor protection with market continuity.
Inside the Virtual Asset User Protection Act
The upcoming law represents South Korea’s most comprehensive effort yet to formalize crypto market rules. Its core mission: protect users, prevent fraud, and establish long-term market stability.
Key Provisions Include:
- Definition of Virtual Assets: Clearly defines what qualifies as a virtual asset while excluding central bank digital currencies (CBDCs) issued by the Bank of Korea.
- Segregation of Funds: Mandates that user deposits must be held separately from exchange-owned assets, typically through third-party custodians like banks.
- Cold Wallet Requirements: At least 80% of user funds must be stored in offline cold wallets to minimize hacking risks.
- Insurance Coverage: Exchanges must join compensation programs to reimburse users in case of security breaches.
- Prohibition of Unfair Practices: Bans market manipulation, insider trading, “pump-and-dump” schemes, and unjustified withdrawal restrictions.
- Real-Time Monitoring & Reporting: Operators must monitor for abnormal activity and report findings to financial authorities promptly.
Perhaps most impactful is the deposit payout mechanism during insolvency. If a platform shuts down or goes bankrupt, designated banks will publicly announce where and when users can reclaim their funds — streamlining recovery and restoring trust.
The Rise of Korea’s Crypto Economy
South Korea has quietly become a global leader in crypto adoption. According to data from research firm Kaiko, in Q1 2025, the Korean won (KRW) surpassed the U.S. dollar as the most traded fiat currency in centralized crypto markets — with **$456 billion in quarterly volume**, compared to USD’s $445 billion.
Several factors drive this:
- Fierce competition among exchanges offering zero-fee trading (e.g., Bithumb, Korbit).
- Retail preference for high-volatility altcoins; over 80% of trades involve small-cap tokens.
- Growing distrust in traditional pensions among young investors — over half of Koreans aged 20–39 don’t believe national retirement plans will support them.
Even political candidates are getting involved: around 7% disclosed owning digital assets in recent election filings.
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Expert Insights: Stability Over Short-Term Gains
While some fear tighter rules could stifle innovation, industry experts argue the opposite.
Matt Younghoon Mok, Senior Attorney at Lee&Ko Law Firm, notes that smaller projects without solid fundamentals may struggle under new disclosure and governance requirements. But he emphasizes this isn’t about suppression — it’s about raising standards.
Similarly, Chang-beom Yoon from Upbit’s Investor Protection Center believes regulation should be viewed through a long-term lens:
“Short-term liquidity might not surge immediately, but the law strengthens market stability. In time, this could attract institutional players and fuel sustainable innovation.”
Former prosecutor Myeong-woon Kim adds that past cases — like the $1.4 trillion Haru Invest freeze or massive price manipulation scandals — exposed gaps in existing laws. The new act fills those voids by creating clear legal accountability for fraudulent behavior in virtual asset transactions.
He concludes:
“Some say banning market-making or mandating real-time reporting will shrink trading activity. But fairness and transparency will ultimately make the ecosystem more resilient — and more vibrant.”
Frequently Asked Questions (FAQ)
Q: Will hundreds of tokens be delisted in July?
A: No evidence supports mass delistings. While DAXA is reviewing 1,333 assets over six months, changes will be gradual. Major exchanges have already aligned with key criteria.
Q: Does the new law ban all market-making activities?
A: It restricts unfair market-making practices that manipulate prices or mislead investors. Legitimate liquidity provision remains permissible under strict oversight.
Q: How does cold wallet storage protect me?
A: Cold wallets are offline and immune to remote hacks. Requiring 80% of funds to be stored this way drastically reduces risk of large-scale theft.
Q: What happens if my exchange goes bankrupt?
A: Banks acting as deposit managers will publish payout details publicly. Users can claim funds directly after verification — no need to wait for court proceedings.
Q: Are foreign tokens safe from delisting?
A: Tokens listed on IOSCO-recognized exchanges for over two years may benefit from relaxed review processes under DAXA’s alternative framework.
Q: Is South Korea becoming more crypto-friendly?
A: Yes — through structured regulation. By prioritizing user protection and market fairness, Korea aims to build a trusted environment that attracts both retail and institutional capital.
Final Thoughts: A New Era of Trust
The rollout of South Korea’s Virtual Asset User Protection Act marks a turning point — not an endpoint. While rumors caused short-term volatility, the reality is a carefully orchestrated transition toward accountability and transparency.
For users, this means greater security and recourse. For exchanges, it demands higher operational standards. And for innovators, it offers a clearer path to legitimacy.
As global regulators watch closely, South Korea may soon serve as a model for balancing innovation with investor safety — proving that strong rules don’t kill markets; they strengthen them.
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