According to local media reports, Upbit, the largest cryptocurrency exchange in South Korea, has reportedly been ordered to suspend its operations by the Financial Intelligence Unit (FIU) of the Korean Financial Services Commission (FSC). The exchange is accused of violating the FIU’s customer identification system (KYC) and failing to fulfill its anti-money laundering obligations. Specifically, during the suspension period (up to 6 months), Upbit will be restricted from engaging in business activities related to new customers. Under the Specific Financial Transactions Information Act, the maximum penalty for violating KYC regulations is a fine of up to 100 million Korean won per violation. The Crypto Baozhangmache (포장마차) channel has revealed that Upbit has around 500,000 to 600,000 cases of non-compliant KYC, suggesting that the amount of fines could be substantial.
Upbit, which holds a market share of over 70% in South Korea, may face temporary closure
According to news reports, Upbit, the largest virtual asset exchange in South Korea, has received a notice of suspension due to alleged violations of the customer identification system (KYC) and failure to fulfill anti-money laundering obligations. The Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) notified on the 9th that it may impose sanctions primarily involving suspension of operations. If the sanction is confirmed, Upbit will be restricted from engaging in business activities related to new customers during the suspension period (up to 6 months).
However, it is understood that the suspension period mainly limits new customer registrations, while existing users can still conduct transactions on Upbit. Currently, Upbit’s trading volume accounts for over 70% of the South Korean virtual asset trading market. Upbit will submit a statement of opinion on the sanction to the FSC by the 20th. The FSC plans to hold a sanction review meeting on the 21st to finalize the sanction period and other contents.
Record-breaking fine for violating KYC regulations, Upbit may face penalties
Reports indicate that Upbit has received more severe sanctions than expected, as the maximum penalty for violating KYC regulations is a fine of up to 100 million Korean won per violation. In South Korea, the operation license for exchanges is renewed every three years, and Upbit’s license expired in October last year. In late August last year, the FSC began inspecting the business license renewal application submitted by Upbit and discovered suspected non-compliance with KYC procedures.
Violation of anti-money laundering rules by trading with unreported overseas exchanges
In addition, Upbit is also accused of trading with unreported overseas digital asset operators, and has been subjected to sanctions regarding anti-money laundering rules. However, Upbit officials stated that it is not easy to identify unreported overseas exchanges on the blockchain in advance, and this was not done intentionally. Upbit’s parent company, Dunamu, also issued a statement clarifying the facts according to the procedure, and reiterated that the sanction would not affect existing users.
Sanction content to be decided on the 21st, previous case invalidated due to unclear investigation
The Crypto Baozhangmache (포장마차) channel suggests that Upbit may have around 500,000 to 600,000 cases of non-compliant KYC, potentially resulting in record-breaking fines. The channel also cited the case of another exchange, Hanbitco, where 197 cases of non-compliant KYC resulted in a fine of 2 billion Korean won ($1.37 million). However, the final decision will have to wait until the 21st, as in the case of Hanbitco, the court deemed the investigation to be unclear, resulting in the invalidation of the penalty.
Risk Warning
Cryptocurrency investment carries a high level of risk, and prices may fluctuate dramatically, resulting in the loss of all invested capital. Please assess the risks carefully.