South Korea’s top cryptocurrency exchange Upbit is facing a barrage of regulations. The platform faces a six-month ban from registering new users for violating know-your-customer (KYC) obligations.
According to local media outlet Naver Publishing, the Financial Intelligence Unit (FIU), part of the Korea Financial Services Commission, issued a suspension notice after reviewing Upbit’s business license renewal.
FIU cracks down on KYC violations
According to the report, regulators found between 500,000 and 700,000 improper KYC verifications. The revelations reportedly could result in fines of up to $68,600 for each violation under the country’s Special Financial Transactions Act, for a total fine of $34.3 billion. .
Additionally, authorities allege that Upbit violated laws restricting transactions with unregistered foreign crypto service providers. An FIU spokesperson said the enforcement action underscores its commitment to restoring order and fairness in the cryptocurrency space.
.@Official_Upbit According to the report, it could face sanctions in South Korea for money laundering and failure to comply with identity verification obligations. by @chamomileshumba.https://t.co/Q8jws6Nz7U
— CoinDesk (@CoinDesk) January 16, 2025
Although the proposed sanctions would only restrict new user registration, the reputational and economic fallout could be far-reaching. Upbit, which controls more than 70% of South Korea’s crypto trading volume, reported daily trading volume of more than $7 billion in 2024, according to data from CoinGecko.
The renewal of the business license is still under review, and depending on the timing of these penalties, smooth operations may become difficult in the future. The FIU reportedly plans to make a final decision on January 21st, after Upbit has had the opportunity to file a lawsuit by January 20th.
The disciplinary action signals broader regulatory action to strengthen anti-money laundering and anti-terrorist financing efforts in the crypto space.
Tightening regulations
The Virtual Asset User Protection Act, which went into effect in July 2024, has already reshaped the compliance landscape, forcing exchanges to address more stringent requirements.
Digital asset markets are closely monitoring the situation over concerns that the Upbit case could set a precedent for stricter enforcement across the industry. The controversy arose in the wake of a 2017 data breach at Bithumb, another major South Korean exchange, which exposed 31,000 user accounts.
South Korean regulators have since tightened their grip on cryptocurrency businesses, as seen in this high-profile action against Upbit. The industry is currently awaiting the FIU’s final ruling, which will determine the fate of Upbit and the regulatory direction of South Korea’s crypto sector.
This article was written by Jared Kirui from www.financemagnates.com.
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