Upbit Suspension Notice in South Korea Over KYC Violations

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It appears that South Korea’s largest cryptocurrency exchange, Upbit, is said to have been issued a suspension notice by the Financial Services Commission (FSC) due to accusations of failing to comply with anti-money laundering (AML) and customer identification (KYC) regulations.

Upbit Faces Suspension Of Up To 6 Months

Last Thursday, it was announced by the Maeil Business Newspaper that South Korea’s Financial Intelligence Unit (FIU) warned cryptocurrency exchange Upbit about potential penalties due to suspected breaches of the Financial Transaction Information Act.

The report indicates that Upbit has allegedly neglected their responsibilities regarding Anti-Money Laundering (AML), such as disregarding their Know Your Customer (KYC) system, potentially leading to a six-month ban on operations.

The action taken will prevent Upbit from onboarding new users during this timeframe; however, current clients will continue undisturbed. To clarify, this regulation aims to halt new customers from transferring cryptocurrency off the platform temporarily, as per the exchange’s statement mentioned in the article.

By January 20th, Upbit must file an appeal with the Financial Intelligence Unit (FIU). The next day, the regulatory body is scheduled to finalize its decision, including determining the length of any penalties.

The Maeil Business pointed out that sanctions on Upbit could potentially affect other cryptocurrency exchanges because it might be seen as an indication that financial authorities aim to address the illegal and unfair market conditions highlighted within the virtual asset industry since the implementation of the Virtual Asset User Protection Act in July last year.

South Korea is moving forward to the second part of its fresh regulations for cryptocurrency investors. The initial phase aimed at ensuring secure storage of client funds and combating unjust trade activities. Now, in this second phase, attention shifts towards bridging regulatory loopholes concerning the issuance and circulation of digital assets.

South Korea’s Crypto Industry Awaiting The Sanctions

It appears that there’s a lot of discussion going around about how sanctions might impact the process of Upbit renewing its business license, as this is typically required every three years under the Special Money Act. In simpler terms, because Upbit is a provider of virtual asset services (VASPs), it needs to obtain a new license every three years to continue operating.

As a researcher delving into the financial sector, I’ve been closely following the case of Upbit’s license renewal process. The prolonged duration of this process has sparked intrigue within the financial community, leading to speculation about the reasons behind it. Previous reports suggest that an extensive investigation by the authorities might be the culprit, with the original license expiring in October.

Upon my examination of the exchange’s license renewal process, I uncovered numerous instances that appeared to be in violation of customer identification protocols, as overseen by the Financial Intelligence Unit (FIU). Specifically, I discovered approximately 600,000 cases where Know Your Customer (KYC) procedures were not executed diligently.

It is said that the cryptocurrency platform may have created numerous accounts without the necessary checks, potentially breaching Anti-Money Laundering and Countering Financing of Terrorism regulations.

Reports indicate that Upbit might be subject to penalties totaling up to 100 million won for each instance, approximately equivalent to $68,000. If the alleged 600,000 instances are all verified and penalized, the potential cost could amount to a staggering $40 billion.

As a crypto investor, I’ve learned from a recent report that the Financial Intelligence Unit (FIU) reportedly took action against a crypto exchange due to suspicions that it was facilitating transactions with unverified foreign businesses, which is not compliant with local regulations here in South Korea. According to these rules, only registered service providers are allowed to conduct transactions on local exchanges.

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2025-01-17 12:41