Litecoin Delisted on Major South Korean Exchanges - News Brief

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In the last week of May, 2022, major South Korean cryptocurrency exchanges issued an investor's alert, warning of the regulatory risks associated with confidential transactions. And more specifically - Litecoin [See Nagoda, K. South Korean Exchanges Issue an Investment Warning for Litecoin, is Delisting Next? - News Brief. (Accessed June 8, 2022)].

"The Specific Financial Information Act in South Korea is one of the most rigorous crypto legislation in the world. Crypto exchanges must follow strict know your customer and anti-money laundering measures as a result of the legislation, and anonymous transactions are forbidden. LTC’s delisting was widely anticipated, especially after exchanges issued a warning earlier this year. Several other privacy currencies have been delisted by Korean exchanges in the past" [CoinCu. Litecoin Is Now Being Delisted By Many Major South Korean Crypto Exchanges, But Why?. (Accessed June 8, 2022)].

In a public announcement earlier today (June 8, 2022), South Korean Exchange Upbit ended market support for Litecoin commencing June 20, 2022. Per market rules, investors will have 30 days from the end of market support to remove their funds.

The Upbit announcement also provided the following reasons for its termination of market support for Litecoin:

• According to the Act on Reporting and Using Specified Financial Transaction Information, exchanges shall verify whether transmission records can be verified for digital assets with the technology that prevents transmission records from being identified (hereinafter referred to as "anonymous transmission technology"), and take appropriate action if anonymous transmission technology is to be found. Upbit is committed to complying with the aforementioned relevant laws and regulations and to prevent money laundering and public threat financing.
• When reviewed the network upgrade conducted by the LTC Foundation MimbleWimble Extension Blocks,MWEB, the upgrade was found to involve the selection of option that enables users to not expose transaction information. As a result, Upbit issued an investment warning for Litecoin(LTC) on May 23, 2022, as we have decided that the addition of anonymous transmission technology to Litecoin (LTC) is likely.
• Upbit asked the Litecoin(LTC) Foundation to provide explanation for its technology, and went through a torough review based on their reply. As a result of the review, we decided to end market support for LiteCoin (LTC) based on the judgment that the option included in the upgraded network, which enable users to not expose transaction information, corresponds to 'anonymous transmission technology' under the Act on Reporting and Using Specified Financial Transaction Information.

[Upbit. End of market support for Litecoin(LTC) (06/20 11:00). (Accessed June 8, 2022)].

"The delisting comes in the light of the much-awaited MWEB upgrade that made LTC transactions private, hiding some of the key identifiers. The upgrade was released earlier this year, nearly two years after its first proposal" [Jha, P. Major South Korean crypto exchanges delist Litecoin. (Accessed June 8, 2022)].

In addition to Upbit, four other major South Korean exchanges Bithumb, Coinone, Korbit and Gopax have now delisted Litecoin.

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"South Korea has some of the most stringent crypto regulations worldwide, and the Specific Financial Information Act is one of them. Under said rule, crypto exchanges are required to enforce strict know your customer and anti-money laundering policies, and anonymous transactions are prohibited" [Id].

And while the Mimblewimble update does not only focus on privacy, but also on decreasing block size to provide improved speeds and scalability, the exchanges appear keen not to end up in hot water with the authorities. As such, their swift and concerted effort to delist appears to be something of a conciliatory move. Last month, all five exchanges were hauled before lawmakers to explain why they had failed to communicate with one another over the delisting of LUNAC following the Terra ecosystem crash and the ensuing controversy in South Korea. The exchanges responded by claiming they would set up a joint listing/delisting council – which now appears to have claimed its first victim, litecoin.

[Alper, T. Five South Korean Crypto Exchanges to Delist Litecoin Following Mimblewimble Upgrade. (Accessed June 8, 2022)].

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