[Exclusive] 43% of 157 Newly Listed Coins Face Delisting... 'Crypto Winter' Far from Over

[Frozen Coin Investment] ① Despite Aggressive New Listings, Trading Volume Recovery Remains Distant
Poor Coins Proliferate Leading to Continuous Delistings... Investor Sentiment and Trust Recovery in Fog

Large electronic display board set up at Upbit Lounge in Gangnam-gu, Seoul / Photo by Jinhyung Kang aymsdream@

The top five domestic virtual asset exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax) are actively supporting new coin trading (listings) to overcome the so-called 'crypto winter' (virtual asset downturn). This is because trading volume has decreased due to the virtual asset market slump, triggering red flags on their performance. However, the number of delisted coins has not decreased, and various negative issues such as 'listing fees (bribes)' controversies and price manipulation are only eroding investors' trust.

Seeking a Breakthrough from the Downturn through New Listings? 'Not So Sure'

According to data obtained by Asia Economy through the office of Yoon Young-duk, a member of the Democratic Party of Korea, the number of newly listed coins on the five major virtual asset exchanges by the end of August was 157. Although this is fewer than the 275 in 2020 and 235 in 2021 when the virtual asset market was booming, considering that the total number of new listings last year was 140, it shows that the exchanges have aggressively supported new coin trading despite the market downturn. The increase in new listings occurred amid sharply weakened investor sentiment due to incidents such as the Luna-Terra crisis, the bankruptcy of FTX?the world's third-largest virtual asset exchange?and rapid price drops. It is interpreted that the exchanges took aggressive steps, expecting that attracting investors' attention through new listings would increase trading volume again.

Upbit, which has solidified a dominant position with an average market share of 85%, and Bithumb, holding about 12% market share as the second largest, are the most aggressive. Upbit introduced a total of 28 new coins by August this year, already surpassing last year's 19 new listings. Especially in the large-scale KRW market, Upbit supported trading for 5 new coins last year but has already supported 9 new coins this year.

Bithumb is even more aggressive than Upbit. Having introduced 33 new coins last year, Bithumb has already supported trading for 73 new coins this year. This move is seen as a response to the crisis felt due to Upbit's overwhelming market share. The plan is to expand investors' choices with various new coins and increase market share.

Coinone, with about a 3% market share, is also actively listing new coins. It has newly listed 38 coins this year, already surpassing last year's 24. Korbit and Gopax, with market shares below 1%, are more passive. It appears they judged that the effect of new listings would be limited due to their small market share. Instead of new listings, they are focusing on attracting customers through service improvements.

Although exchanges are taking aggressive actions, trading volumes remain low, so the effect of new coins is practically negligible. According to data from CoinGecko, a virtual asset market data site, Upbit's daily trading volume was $4.9798 billion (approximately 6.5227 trillion KRW) on February 6 but decreased to $760.63 million (about 1.0109 trillion KRW) on June 1. Although there was some recovery, it recorded $1.73735 billion as of the 20th of this month. Bithumb's daily trading volume has continuously declined: $253.52 million on February 6, $165.75 million on June 1, and $109 million on the 20th of this month.

Delistings Continue, Cooling Investor Sentiment

The industry currently lacks clear alternatives to overcome the crypto winter. Moreover, the proliferation of poor-quality coins has not reduced the number of delisted coins, causing investor trust to plummet. It is difficult for investor sentiment to revive.

The five major exchanges delisted 69 coins from the beginning of this year through the end of August. Last year, the total was 68. Notably, the data submitted by the exchanges to the lawmaker's office does not include some delisted coins by market.

According to the Financial Intelligence Unit (FIU), the number of delisted coins in the KRW market was 75 last year and 70 in 2021. The number of coins designated as investment caution items with potential delisting risk is also significant. Last year, 149 coins were designated as investment caution items in the KRW market, compared to 92 in 2021. The KRW market includes five exchanges supporting KRW-to-cryptocurrency trading: Upbit, Bithumb, Coinone, Korbit, and Gopax. The coin market, which supports only cryptocurrency-to-cryptocurrency trading, includes 22 exchanges, likely resulting in even more delistings and investment caution designations.

Coins can be traded on various exchanges, allowing transfer to other exchanges where trading is possible after delisting. However, in reality, this is practically difficult, and coins often become worthless. Especially for coins listed exclusively on one exchange, delisting inevitably results in 100% investor losses. Among 625 circulating coins last year, 389 (62.3%) were exclusively listed coins. As of the first quarter of this year, the number of coins exclusively listed per exchange was: Upbit 52, Bithumb 64, Coinone 69, Korbit 28, and Gopax 17.

Additionally, among the 625 circulating coins last year, 132 were so-called 'junk coins' (virtual assets with very low market capitalization under 100 million KRW). Junk coins, lacking financial strength and liquidity, are prone to sudden price fluctuations caused by specific groups, requiring caution. Although the Virtual Asset User Protection Act was passed in the National Assembly, it is scheduled to be implemented in July next year. Currently, the domestic coin market is rife with price manipulation suspicions involving junk coins. Certain groups exploit regulatory loopholes to generate profits through wash trading and other means, but prosecutors and financial authorities have yet to intervene.

Trust in Exchange Listing and Delisting Standards Hits Rock Bottom

As delistings continue unabated, there is much criticism regarding the listing standards of each exchange. The recent controversy over listing fees also stems from this. Listing fees refer to bribes received for listing coins. The listing fee controversy remains prevalent in the coin market. The Digital Asset Exchange Alliance (DAXA), formed by the five major exchanges, disclosed key items of a common guideline for trading support reviews in March to enhance market transparency and protect investors. Earlier, in September last year, DAXA announced the introduction of a common guideline for trading support reviews among its five members and implemented it from October. DAXA's policy is to continuously refine the common guideline to keep pace with the rapidly changing market environment. However, investor trust in listing review standards remains low. Since it is a self-regulatory system, there is a strong perception that there are many loopholes.

The final authority for listing and delisting decisions rests entirely with the exchanges. Even if an exchange lists or delists a coin slightly outside the guidelines, there is no way to prevent it. An industry insider said, "The fact that each exchange supports trading for different coins suggests that each exchange has different listing and delisting standards," adding, "Although they have strong authority, it is questionable whether they are doing their best to protect investors." Lawmaker Yoon Young-duk pointed out, "As trading declined amid cold investor sentiment, exchanges increased new listings this year, but coins issued by somewhat substandard blockchain projects were also listed one after another, exposing investors to risks." He added, "DAXA has yet to release delisting guidelines," and emphasized, "Financial authorities should actively intervene to protect virtual asset investors instead of leaving it to self-regulation."

On the 18th, the New York State Department of Financial Services proposed establishing standards for virtual asset listings and delistings. The proposal aims to create criteria for virtual asset companies to assess the risk level of virtual assets by measuring fraud, price manipulation, liquidity, and other factors to protect investors. Lawmaker Yoon said, "Related discussions will continue in Korea as well," and added, "We must protect virtual asset investors and develop the blockchain industry through institutional improvements and legal amendments."

However, exchanges expressed that they comply with listing guidelines. An Upbit representative explained, "We review trading support through key project information, technical capabilities, communication, network operation transparency, and trading levels, and also check compliance with DAXA's common guidelines," adding, "To ensure fairness and objectivity, we have formed a trading support review committee including external members." He further stated, "Delisting decisions are also made by the trading support review committee. For this, we conduct regular evaluations based on quantified criteria and monitor themes to check for reasons to designate investment caution items or delisting causes." A Bithumb representative emphasized, "During the trading support process, we evaluate the business growth potential and feasibility of the virtual asset and review technical, legal, and financial issues." Regarding delisting, he added, "If user harm is anticipated or market order is at risk during post-listing monitoring, we designate the coin as an investment caution item and terminate trading support according to regulations and principles."