South Korea’s Financial Supervisory Service (FSS) has clarified its role amid rumors about the potential removal of numerous digital assets from local crypto exchanges.

On June 17, reports surfaced that the FSS had instructed registered crypto exchanges, including Upbit, Bithumb, and Gopax, to evaluate various tokens on their platforms. This directive is in line with the Virtual Asset User Protection Act, which requires strict compliance and regular assessments of listed tokens.

Under the new law, exchanges must adhere to stricter guidelines for token listings and reassess existing tokens every six months. They must evaluate the reliability of the issuing entity, user protection measures, technology, security standards, and regulatory compliance of these digital assets.

The legislation also imposes severe penalties for non-compliance, including a minimum one-year jail term or fines ranging from three to five times the illegal profits generated. Investors fear that up to 600 altcoins could be delisted during these reviews, causing mass panic selling.

In response to these rumors, the FSS denied direct involvement in the listing or delisting of virtual assets on exchanges. The regulator stressed that its role is limited to establishing listing standards and not overseeing the review process. It stated:

"Financial authorities inspect virtual asset operators and do not directly review stocks. We participated [in the initial processes] because there was a request to provide support in creating best practices, but the announcements will be made by the exchange and DAXA."

Additionally, there are reports that the FSS plans to create a new division focused on crypto regulation. This division would handle policy development, regulatory oversight, and establish a framework for the growing sector.