South Korean Exchanges Issue an Investment Warning for Litecoin, is Delisting Next? - News Brief

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"Back in 2019, South Korean exchanges delisted anonymous coins en masse under pressure from regulators, leading to average losses of around 25% in the space of a month. Now they have Litecoin in their sights." [Stormgain. Mimblewimble threatens to get Litecoin delisted. (Accessed May 27, 2022)]. Currently trading down at $61.65 (as of May 27, 2022 at 14:16 PM), Stormgain warns that if Litecoin is delisted, price could correct to $53.

So what crawled up these South Korean Exchanges butts? Well....

The Litecoin upgrade to Mimblewimble, proposed about two and a half years ago, was finally released earlier in 2022 [See, Interdax. Examining Litecoin’s MimbleWimble-Extension Block Proposal. (Accessed May 27, 2022); see, also Bourgi, S. Litecoin is finally launching its major Mimblewimble upgrade. (Accessed May 27, 2022)].

The MimbleWimble Litecoin upgrade has been the cryptocurrency's most eagerly anticipated update. MWEB not only adds new privacy features for LTC users but also incorporates blockchain key performance improvements. MWEB compresses unnecessary transaction data from the blocks, allowing for discreet transactions on the Litecoin blockchain.

[Kirimi, A, Litecoin confidential transactions spook Korean exchanges. (Accessed May 27, 2022)].

According to a statement issued by the South Korean Exchange, Bithumb (as well as a similar statement by Upbit), "[Investment Warning] Litecoin (LTC) designated as investment warning....`WimbleWimble Extension Blocks (MWEB) extension block upgrade has been officially activated. The Mimblewimble (MWEB) expansion block upgrade includes enhancements to the scalability of the Litecoin network, but its core item includes an enhanced 'Confidential Transaction' option that does not expose transaction information" [Bithumb. Investment Warning. Accessed May 27, 2022)].

Bithumb and Upbit combined account for the majority of the trading volume in South Korea.

Specifically, both Bithumb and Upbit believe "Litecoin's use of privacy-focused technology Mimblewimble allows users to make 'confidential transactions', that allow them to send tokens while concealing transaction data....The two exchanges cited Korea's Act on the Reporting and Use of Specific Financial Transaction Information, a law that requires crypto exchanges to put in place Know Your Customer (KYC) and Anti-Money Laundering (AML) systems" [Kirimi, supra] in support of the warnings.

If history provides any guidance in this matter, the South Korean Exchanges tend to delist cryptocurrencies for which they have issued investment warnings.

The problem is exacerbated by the recent collapse of Terra (LUNA). Representatives of South Korea's major crypto exchanges were called before the country's parliament to explain the circumstances surrounding huge investor losses, while the Seoul police department sent them a request to freeze the assets of Luna Foundation Guard to prevent any further withdrawals of funds by potential fraudsters. The negative news climate can only increase the likelihood of Litecoin being delisted soon.

[Stormgain, supra].

"After losing much of its traction owing to new-age altcoins, the new upgrade is expected to provide a cushion for its price and lure privacy-focused investors. However, a case of delisting could dampen the chances of a much-needed meaningful rebound in Litecoin’s price action" [Deka, C. South Korean Crypto Exchanges Issue Investment Warnings After Litecoin’s MWEB Update. (Accessed May 27, 2022)].

Even as the MVEB provides less protection and fails to reach the degree of confidentiality as either Zcash or Monero, it does not seem the South Korean Exchanges will relent. This remains true even in light of the development of quantum computing which will likely render MVEB's protection algorithm useless [see, e.g. Stormgain, supra].

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