South Korea’s FIU has accused Upbit, the nation’s largest crypto exchange, of AML and KYC violations, potentially leading to a six-month ban on new customer transactions.
South Korea’s top crypto exchange, Upbit, is facing possible sanctions after being accused of failing to meet anti-money laundering (AML) rules, including not properly verifying customer identities (KYC).
The Financial Intelligence Unit (FIU) of the Financial Services Commission notified Upbit on January 9 about potential penalties, including a suspension of operations for breaking the Specific Financial Transaction Information Act.
Restrictions on New Customer Transactions
If the sanctions are approved, Upbit will be barred from onboarding new customers for up to six months, specifically blocking them from transferring crypto assets outside the platform.
Existing customers, however, can continue trading as usual. As Upbit accounts for over 70% of South Korea’s crypto trading volume, the sanctions could significantly impact its business.
Upbit has until January 20 to respond, after which the FIU will hold a hearing on January 21 to finalize the decision, including the length of the suspension.
A Push for Market Reforms
This move highlights South Korea’s increased efforts to address illegal activities in the crypto market, especially after passing the Virtual Asset User Protection Act in July. Other exchanges are watching closely, as Upbit’s situation reflects the government’s tougher stance on compliance.
The sanctions also raise questions about Upbit’s future license renewals. Although its license was renewed last October, the FIU’s inspections revealed 700,000 instances of incomplete customer verification.
They also found that Upbit violated rules by doing business with unregistered overseas crypto operators. Upbit explained that identifying these unregistered exchanges on the blockchain was challenging.
The penalties could include hefty fines, with the law allowing up to 100 million won ($80,000) per violation. This case has turned the spotlight on compliance issues and the broader push for transparency and fairness in South Korea’s crypto industry.
