Delisting can be the result of a project that no longer meets the exchange’s listing standards.
When a coin is delisted, all its trading pairs are removed from the crypto exchange. But investors who are already invested in the delisted project are provided with a specific time frame to withdraw their funds.
But can it be listed again? Let’s dive deep and understand its various facets.
Can a delisted stock be relisted?
Theoretically, relisting a stock is possible; however, this instance is pretty uncommon. The currency manufacturer first has to avoid bankruptcy, resolve the issue, find the solution for why they were delisted, and then follow the regulations and standards said by the SEC and the exchange.
Well, this happened precisely with XRP. XRP token holders can now breathe a sigh of relief as Newton Crypto, one of the leading cryptocurrency exchanges, recently announced that they would be relisting XRP.
However, market experts believe that the value of XRP will be bullish in the long term. As per a recent report, the value will be $1.22 in 2022 and will increase to $3.63 by 2025. Therefore, if there is a buying pressure recovery, there is a probability of a 55% rally in XRP.
What is Delisting?
Delisting is a process of removal of a particular asset, like a stock or cryptocurrency, from an exchange. For example, an asset can be delisted as a request from the manufacturing team or if the asset or team can no longer fulfill the exchange’s listing requirements.
Once your asset is delisted by the exchange or any central governing body, it can no longer be purchased or sold on any exchange. In most cases, delisting is permanent; however, the asset might be relisted in special conditions.
Top reasons why a Crypto exchange can delist a cryptocurrency
Now you may feel that investing in any assets, let us take cryptocurrency, can be pretty risky as it can be delisted without warning. However, that is not the case; not every other currency will be delisted. Here are the reasons why a crypto exchange might delist your cryptocurrency.
1. Unresponsive team
Do you remember in 2018, Houbi and OKEx exchanges stopped trading in ERC-20? This is because exchanges found a malicious bug in many coins with the same features as ERC-20 with a few modifications. However, the code was rewritten, and the bug was fixed immediately.
So whenever a crypto exchange team faces technical difficulties with a specific currency and trading in the currency becomes risky, they will contact the developing team within working hours. However, if the unit is unresponsive, it will be delisted.
2. The exchange may charge rent
In 2019, many project managers worldwide revealed that certain crypto exchanges have threatened to delist their coins (stating reasons for low trading volume) unless they buy some kind of premium service from the exchange. So in fear of delisting, project managers had to buy the services.
3. Maintenance Cost
Once a cryptocurrency is listed on an exchange, the exchange’s programmers are responsible for supervision and maintenance. However, if the exchange believes that the maintenance work is expensive, the trading volume is less, and the trading fee paid to them is much lesser, they can delist the currency on the grounds that it is not worth the maintenance.
4. To Prevent Wash Trading
Wash Trading helps a crypto exchange earn a trading fee, the percentage of each trade (both for buying and selling) performed from the same account.
However, big crypto exchanges believe that wash trading is unhealthy and creates false signals. Therefore, they can delist a cryptocurrency if there is a smaller number of traders. They can delist the currency even if it generates massive trading fees due to wash trading. They believe that a strong customer base is more important than the artificial trading volume, affecting the exchange’s reputation.
5. If the cryptocurrency is used for shady activities
If a certain currency is involved in suspicious activities, an exchange can delist it without warning. Common Instances are if the currency is involved with Ponzi schemes, if the developing team changes the number of coins without alerting the customers, or if the company is misusing the company funds.
Apart from all these points, the cryptocurrency developer has to disclose necessary information to the Security and Exchange Commission (SEC), including material news and filing quarterly and annual reports within the deadline. The SEC can delist the coin if any currency fails to meet the requirements.
What happened to XRP?
In December 2020, the US financial regulator SEC filed a lawsuit against the payment giant Ripple. Here they accused them of selling unregistered XRP tokens. Immediately after the case, major crypto exchanges like OKCoin, Coinbase, Kraken, and Crypto.com delisted the XRP token. For the first few weeks, trading of XRP was moved to a limit, and by the next month, it was suspended completely.
What happens to my XRP if delisted?
Obviously, you will panic if you see that the cryptocurrency you invested in has been delisted worldwide. But there is nothing to worry about, as the cryptocurrency’s suspension doesn’t mean your money is gone.
According to a circular by one of the exchanges, even after the suspension of XRP tokens, you can access your XRP wallets, and deposit and withdrawal functionality will remain active. Even though you will no longer be able to sell your XRP tokens, convert them to Fiat currency, or withdraw the currency to your bank account, you will have the freedom to view your balance. You can even deposit more XRP to your account and send XRP to another wallet outside your registered account.
A cryptocurrency can be delisted at any time, so you are always advised to invest in popular currencies that have been on the market for at least a few years.
Even if you own delisted cryptocurrency, the exchange might give you time to sell the coin. However, you can hold on to your tokens in a private crypto wallet, if your cryptocurrency has been recently delisted or you have problems with a Crypto exchange.
And when we talk about crypto taxes and exchanges, how can we forget KoinX? Head over to KoinX to start calculating the taxes on your crypto portfolio.