Five major South Korean centralized crypto exchanges (CEX) have delisted Litecoin (LTC) due to Litecoin's new privacy feature upgrade.
Litecoin is an old school crypto cloned from Bitcoin with a $4.3B market cap. As part of its MimbleWimble Extension Blocks (MWEB) upgrade, Litecoin added an optional privacy feature that obscures the amount of LTC moved in a transaction and the parties involved. This feature can help investors avoid "know your customer" (KYC) regulations.
The Litecoin Foundation claims it worked closely with CEXs to keep LTC from being delisted. The privacy feature is optional, and a CEX can disable private LTC transactions on its platform.
Nevertheless, on May 23 2022, two of South Korea's largest CEXs, Bithumb and UPbit, publicly warned the Litecoin Foundation that they would delist LTC if the privacy update succeeded. This week, Bithumb and UPbit followed through with their threats, and Korean CEXs Korbit, Gopax, and Coinone joined them in delisting LTC.
South Korea's Act on the Reporting and Use of Specific Financial Transaction Information requires CEXs to KYC their customers and prevent money laundering. It seems like South Korea's major CEXs have determined LTC is too risky to allow on their platforms, even if they “switch off” privacy mode to ensure all transactions are non-private on the exchange.
While Bithumb and UPbit's responses to the Litecoin privacy upgrade are concerning, the rest of the world shouldn't panic. South Korea is home to Do Kwon and the collapsed Terra ecosystem, so their lawmakers are sensitive to crypto shenanigans at the moment. Monero (XMR), Zcash (ZEC), and other privacy cryptos have been delisted in South Korea for a while, and those cryptos continue to be bought and sold on American CEXs and elsewhere.