What is the real challenge for South Korean exchanges now that the regulatory framework is in place?

The proportion of tokens launched by South Korean crypto exchanges has dropped from 85% to 9%, as regulations reshape listing logic, presenting new challenges for exchanges.

Written by: @heytranks

Compiled by: AididiaoJP, Foresight news

I. Regulatory Implementation Leads to a Significant Shrinkage in New Token Launches in South Korea

The structure of new token listings on South Korean crypto exchanges has changed drastically in recent years.

First, let’s clarify a concept. "Initial launch" refers to a token first being listed on the Korean won markets of Upbit or Bithumb before being available on global exchanges like Binance, OKX, Bybit, and Coinbase; or it may not have been listed on any of these four at all. The proportion of such new tokens among new listings was 85% in 2019, but it has dropped to just 9% by 2024.

This downward trend aligns almost perfectly with the timing of the establishment of South Korea's virtual asset regulatory framework.

The turning point was the Act on Reporting and Using Specific Financial Transaction Information. In March 2020, the National Assembly passed an amendment requiring virtual asset service providers to register and fulfill anti-money laundering obligations, with exchanges needing to complete registration by September 2021. Additionally, there was a new hard threshold for the Korean won market: the use of real-name bank accounts was mandatory. This meant that exchanges had to operate under the anti-money laundering standards of traditional financial industries. We estimate that these standards directly influenced listing decisions. The data speaks volumes: the number of local initial launches plummeted from 19 per quarter to just 3 in the third quarter of 2021—the very quarter registration deadlines were set. Since then, the focus of new listings has shifted to assets that have been traded overseas first.

The second step involved a common review standard adhered to by exchanges. In 2022, five Korean won exchanges formed the Digital Asset Exchange Alliance (DAXA) to establish unified review guidelines. The best practices for listings will take effect in July 2024. This set of rules does not mandate that tokens must be listed overseas first, but it provides a shortcut: assets traded on qualified overseas exchanges for more than two years can be considered as meeting white paper and disclosure requirements.

By 2026 (as of October), the proportion of initial token launches has rebounded to 18%. However, if we exclude assets that were first traded on overseas futures markets from the "local initial launch" metric, this proportion remains only 10%.

II. Total Number of Listings Increases Despite Decrease in Initial Launch Proportion, Timing Follows Market Trends

While the proportion of initial launches is declining, the total number of listings is actually increasing. The number of new tokens listed in the Korean won markets of Upbit and Bithumb rose from 43 in 2022 to 116 in 2023, and is projected to reach 125 in 2024, with a surge to 238 in 2025.

How long tokens are traded overseas before coming to Korea depends on market conditions. In 2025, when Bitcoin's price in Korean won approached its peak, 111 tokens were listed in Korea within 30 days of being listed overseas, accounting for 47% of the total. By 2026, the trend reversed: tokens traded overseas for more than a year became the largest group, with 52 tokens (31%). Even older tokens like CRV and RSR, which have been traded overseas for over six years, were introduced to Korea.

Thus, the practice of listing tokens in South Korea has shifted. The framework of "trading overseas first" has been established amid regulatory formation, while the timing of listings is swayed by market conditions.

III. Improved Stability, but Exchanges Face Challenges Beyond Listings

With more tokens being traded overseas first, their stability post-listing has also improved. The proportion of tokens that received investment warnings or were announced for delisting within two years of listing was 24% for tokens listed in 2020, but this dropped to 10% for those listed in 2024.

This ratio varies significantly by token type. Among all assets listed from 2020 to 2024, 44 out of 148 initial tokens (30%) received investment warnings or were announced for delisting within two years; whereas among the 279 tokens that were traded overseas first, only 26 (9%) faced similar issues, less than a third of the initial launch rate.

The duration of overseas trading also affects post-listing prices. On average, tokens that can be listed on Korean exchanges within 30 days of being listed overseas saw a median price drop of 39% within 30 days of listing; while tokens traded overseas for over a year only dropped by 7%.

In summary: tokens that were traded overseas first have a lower probability of receiving warnings or being delisted after listing; the longer the overseas trading duration, the less the price drops post-listing. The best listing practices also alleviate the review burden for such assets, so the focus of new listings in South Korea is likely to continue leaning towards tokens that have been traded overseas for a long time, though the timing will still fluctuate with market conditions.

However, this rule of "prioritizing overseas trading history" is not entirely beneficial for exchanges. The reason is simple: tokens that have been traded overseas for a long time often see low trading volumes on their first day of listing.

Exchanges primarily earn revenue from transaction fees, and low trading volumes on the first day naturally drag down performance. Of course, if the market heats up again, the situation of newly issued tokens from overseas landing in Korea may increase, alleviating some pressure. But relying solely on a listing structure that fluctuates with market conditions makes it difficult to sustain a stable business.

After the regulatory framework has taken shape, the stability of listings has indeed improved. However, the real challenge for South Korean exchanges now is: beyond listings, how to create new trading demand and sources of revenue.

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