- Upbit faces suspension as South Korea probes 700K KYC breaches and AML violations.
- FIU finds Upbit violated KYC laws, risking billions in fines and license renewal.
- South Korea targets Upbit for KYC violations and dealings with unregistered firms.
Upbit, one of the cryptocurrency exchanges in South Korea, has been informed that it may face suspension due to non-compliance with the country’s Know Your Customer (KYC) rules. The Financial Intelligence Unit (FIU) of South Korea’s Financial Services Commission (FSC) released the advanced notice on January 9th. The suspension has been attributed to Upbit’s inability to meet some AML standards, including customer identification. If implemented, the sanctions will prevent Upbit from onboarding new customers for six months, but those already on the platform will not be affected.
KYC Violations and Business Impact
Upbit, which accounts for more than 70% of South Korea’s domestic cryptocurrency trade volume, will suffer if the sanctions are implemented. The company has been granted up to January 20th to submit its response to the Financial Intelligence Unit. The FIU will then conduct a hearing on 21st January to determine the final penalties, including a temporary business ban for new accounts. These measures come after inspections were done during Upbit’s business license renewal process. The authorities also found that Upbit had failed to perform KYC checks in about 700,000 cases, which led to more questions.
However, the current users of the Upbit exchange will still be able to trade while the investigation is ongoing. However, the exchange will not be able to onboard new customers or let them transfer their virtual assets out of the platform during the suspension period. Since Upbit holds a significant share of the local market, this penalty may have a more severe impact. The result of this case may set a precedent for other cryptocurrency exchanges operating in South Korea, particularly on KYC requirements and the measures against money laundering.
KYC Violations Lead to Sanctions for Upbit
South Korea’s Special Financial Transactions Act requires penalties for KYC failures to be up to 100 million Korean won (around $68,600) per case. As a result of Upbit’s KYC violations, the fines may range to billions of won. The FIU also affirmed that Upbit conducted business with unreported overseas cryptocurrency operators, violating the Special Act. This could result in more penalties under the law that bars local exchanges from dealing with unregistered virtual currency service providers.
This reflects the recent crackdown by the South Korean authorities on cryptocurrency exchanges within the region to impose strict measures. The Virtual Asset User Protection Act came into force in July 2024 to enhance the monitoring of exchanges to fulfill the anti-money laundering and counter-terrorism financing requirements. If it happens, the suspension will show that the FSC is committed to enhancing market integrity and dealing with illicit activities in the cryptocurrency market.
Related: https://cryptotale.org/sec-pushes-forward-with-ripple-appeal-as-xrp-reclaims-3-1/
Impact on Upbit’s Business License Renewal
Upbit’s future business activities may be affected by the company’s current inspection of its business license. The platform’s license was renewed in October 2024, and the FIU’s review of its KYC practices is directly linked to the renewal process.
The current review and the potential sanctions that may follow raise concerns about whether Upbit will be able to conduct its operations freely in South Korea, where the market is greatly regulated.
