Last week Korea’s Financial Services Commission held a meeting of its Virtual Assets Committee and decided to formulate rules to allow non profits to receive cryptocurrency donations. New guidance was announced for exchanges that receive tokens as payments. It also tightened the procedures around the new token listing, so-called zombie coins and memecoins. The Virtual Assets Committee includes representation of the Korea Federation of Banks and the Digital Asset Exchange Association (DAXA).
For non profits, the processing of crypto donations should be outsourced to organizations with at least five years of experience. Any received cryptocurrencies must be traded on at least three Korean crypto exchanges and the non profit must implement a policy to cash out all tokens upon receipt. In order to comply with anti money laundering rules, donations can only be made directly via a cryptocurrency exchange.
In addition to donation guidelines, the new rules address cryptocurrency exchanges, specifically regarding the sale of cryptocurrencies for the exchange’s own account where it received the tokens as fees. The regulator’s aim is to prevent conflicts of interest. Sales are only allowed where the purpose is to cover the operating expenses of the exchange. An exchange cannot sell the tokens on its own platform and must use a third party instead. To avoid impacting market prices, exchanges can only sell popular tokens that rank among the top 20 on at least five Korean exchanges. Plus, there are daily restrictions on the volume of tokens that an exchange can sell.
Volatility: crypto listings, zombie coins and memecoins
Finally, there are new rules to address the volatility of token prices. The most problematic situations occur during new token exchange listings and in the price fluctuations of thinly traded “zombie coins” and memecoins. For newly listed tokens, the goal is to address imbalances between supply and demand. Therefore, rules have been established to ensure sufficient initial supply and to cap the volume of orders shortly after listing.
Memecoins can only be traded if they meet specific criteria: being already listed on eligible foreign exchanges, having a sufficiently large community (100,000 people), and achieving cumulative transaction volumes of at least one million transactions. Thinly traded tokens must be delisted from exchanges under certain circumstances. Specifically, if the daily transaction volumes are less than 1% of their market capitalization and the total issuance value drops below Won 4 billion ($2.9 million) for 30 days.
The topic of security token offerings (STOs) was discussed and it was concluded there is an urgent need to pass new laws.
Meanwhile, complementing these regulatory developments, Korean banks announced last week that they are collaboratively developing a stablecoin.
