What is a delisting on a stock exchange?

Among new cryptocurrencies, there are projects that failed to develop or were associated with negative reputational factors. Exchanges do not want to cooperate with unreliable companies and at a certain point get rid of questionable assets through delisting.

What is de-listing?
Delisting is the removal of a cryptocurrency from the list of assets available for trading on an exchange. Once such a procedure is performed, traders will not be able to see, buy or sell the blocked asset.

Delisting cryptocurrencies for trading is done on each platform separately. And if one exchange has delisted a particular asset, it does not mean that others will also remove it. But the very fact that a coin is removed from circulation (even on one major platform) entails certain problems.

New cryptolistings on major exchanges noticeably increase a coin’s rating and capitalization. Therefore, it is important for projects to get on the trading lists on platforms such as Binance. And if delisting occurs, it means there is something wrong with the company. Almost always the removal of a token from circulation means there are problems.

Reasons for delisting cryptocurrencies
Exchanges only remove an asset from the list of traded instruments if it clearly does not meet the necessary conditions.

For example, Binance removed three tokens from circulation late last year:

EVX,
APPC,
RDN.

These assets failed to pass the site’s eligibility test.

Before making such decisions, Binance assesses the following project metrics:

The stability of smart contracts and the network in which they are launched;
quality of development and level of progress;
liquidity and trading volume;
the level of commitment of the team to the stated development trajectory;
the security of the network and its stability in case of hacker attacks;
the quality and speed of responses to exchange inquiries as part of the verification by the exchange;
contribution to the sustainability and state of the cryptocurrency ecosystem;
existence of proven facts of negligence or illegal/unethical behavior of management.

Once a coin is removed from circulation, all trade orders with it are deleted.

Below are a few common reasons why exchanges remove coins from the quotation list.

Team related scandals
Companies that value their reputations do not want to be publicly affiliated with troubled projects, as this can negatively affect their own ratings and raise questions from regulators.

Reputation is important for large exchanges: if the trust of users is lost, the company loses customers and its own profits. The absence of claims or strict inspections by regulatory bodies also remains an important factor.

If the platform decided to delist one or more coins, other exchanges may repeat this action, expressing a solidarity position. An example is the situation with the BitConnect project, which was popular back in 2017. After the ICO, its cryptocurrency began to appreciate rapidly, and its rate reached the $460 mark, with a capitalization of $2.6 billion. At the time, this was considered a huge figure.

The project looked promising, and major exchanges added it to their trading lists. But later it turned out that BitConnect was a pyramid scheme with many complaints from customers. This information began to spread quickly, so the major exchanges began to divest the BCC token en masse. As a result, its price dropped to $10 and later dropped to zero.

To avoid such situations, Binance specialists thoroughly check the project before opening trading on it. Therefore, a listing of an unreliable asset on our platform is practically excluded.

Small trading volume
Trading platforms add promising digital coins in circulation in order to attract investors and receive a commission. If there is no interest in the coin and it is not actively traded, it makes no sense to keep it in the listing. In such situations, delisting is used to remove instruments unable to bring sufficient profit to the exchange.

In addition, there are fraudulent schemes involving the use of illiquid coins. And if the exchange allows them to trade, it puts its clients at risk. That is, delisting such assets is one of the factors of sustainable security.

Projects with weak recognition and low capitalization levels are often removed from cryptolisting. These are mostly new coins that failed to make it into the top 200. Also, exclusion from the quotation list may occur if a previously popular asset stopped attracting investors’ attention and lost its position.

In this case, the exchange may not completely remove the project, but only to stop trading in some pairs. For example, in June of this year, Binance removed pairs API3/BNB, SXP/GBP, TLM/BNB. But left the opportunity to trade these assets in other pairs.