The South Korean cryptocurrency landscape is set to undergo a significant transformation as new regulations come into force, potentially forcing local exchanges to delist hundreds of altcoins.

According to reports, the impending Virtual Asset User Protection Act, which will take effect in July 2024, will require crypto exchanges in the country to conduct rigorous reviews of the digital assets they list. This move is aimed at enhancing investor protection and weeding out risky or non-compliant tokens.

Under the new rules, South Korean exchanges, including the major platforms Upbit, Bithumb, Coinone, Korbit, and Gopax, will be required to establish dedicated teams to assess the security, reliability, and compliance of the cryptocurrencies they support. These teams will scrutinize a range of factors, including social credit, development, issuance, information disclosure, transparency, issuance and distribution volumes, market capitalization, and potential conflicts of interest.

Regulators have indicated that they will support exchanges as they review their existing coin listings over a six-month period, after which the exchanges will be required to conduct quarterly maintenance reviews. The new law will also apply to over 20 other exchanges that have not yet obtained the necessary permits to offer fiat (KRW) trading pairs, limiting them to crypto-to-crypto trading.

In the case of truly decentralized projects, such as Bitcoin and decentralized autonomous organizations (DAOs), "alternative screening requirements" will be implemented. However, larger, well-established tokens like Ethereum and XRP may be granted more lenient treatment.

The crackdown on altcoins comes in the wake of several cash-for-listings scandals that have rocked the South Korean crypto exchange industry in recent years. Regulators are aiming to restore confidence in the market by addressing concerns over the potential manipulation of token prices through suspicious listing practices.

The impending changes have been in the works for several years, with major domestic exchanges already purging scores of low-cap "kimchi coins" from their platforms in anticipation of the regulatory action.

As the July 2024 deadline approaches, South Korean crypto exchanges are bracing for a significant reduction in the number of altcoins they support, potentially delisting hundreds of tokens in order to comply with the new rules and protect investors.