Korean exchanges Upbit and Bithumb issued warnings on Litecoin following its MWEB upgrade, as reported by CryptoSlate last month.
The warnings centered around concerns over breaching regulations around money laundering and Know Your Customer (KYC) requirements.
However, fast forward to now and both exchanges have followed through by actioning the delisting. They are joined by Coinone, Korbit, and Gopax.
What is MWEB?
The Litecoin MWEB privacy upgrade went live on May 19 following a prolonged development phase.
MWEB added several features and benefits, including greater scalability through a more compact data organization. But chief among them was an optional element of privacy.
By obfuscating block transactions, details of the transactions that make up the block are unidentifiable. In short, individual inputs are not easily matched with outputs, thus limiting readable information of the transaction to the sender and receiver only.
Litecoin founder Charlie Lee described this as the key to making LTC fungible and therefore complete in terms of possessing all of the qualities of sound money. Lee lists durability, portability, divisibility, scarcity, universally accepted, and fungibility as the qualities of sound money.
Following the MWEB upgrade, Litecoin is now labeled a “dark coin” by the Korean press, who fear its “anonymous transmission” breaches the country’s Specific Financial Information Act.
News 1 reported that, in response, the top five Korean exchanges, Upbit, Bithumb, Coinone, Korbit, and Gopax, delisted Litecoin at the same time.
“the five major domestic cryptocurrency exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax) that operate the KRW market announced that they would delist Litecoin all at once.”
The article states that the Specific Financial Information Act does not allow for “dark coins” that obfuscate transfer records. The notice put out by Bithumb mirrors this comment exactly.
“Bithumb decides to terminate transaction support for virtual assets in accordance with the revised Act on Reporting and Use of Specific Financial Transaction Information, in compliance with regulations on virtual assets with high anonymity.”
During MWEB development, this scenario was considered and dealt with by making MWEB an opt-in feature. This means exchanges and wallet providers can choose not to integrate MWEB and bypass regulatory concerns.
However, Korean exchanges have decided not to risk exercising the opt-out feature.