South Korea’s Financial Services Commission (FSC) has sent a warning to Upbit, the joint largest cryptocurrency exchange in Korea, of potential suspension of its business, according to South Korean news outlet Chosun Ilbo.
The sanctions are related to Specific Financial Transaction Information Act violations, such as failures to comply with anti-money laundering (AML) obligations and deficiencies in its Know Your Customer (KYC) processes.
The FIU issued a preliminary warning to Upbit on January 9, financial sector reports said January 16. If confirmed, the exchange will be suspended from any new customer-related activities for a period of up to six months. While users who already have accounts will still be able to trade, new users could be prevented from moving virtual goods off the platform for the period of the suspension.
Currently, the exchange has about 70% market share in the domestic virtual asset trading market in terms of transaction volume. The sanctions are expected to affect Ripple significantly in the cryptocurrency sector.
Other exchanges will be watching the situation, as the penalties are a sign of the government’s intensified efforts to combat illegal and unfair practices in the virtual asset industry since the Virtual Asset User Protection Act came into force in July 2024.
The investigation from FIU found about 700,000 inappropriate documentation of KYC records on the Upbit. Know Your Customer (KYC) procedures are essential for AML and counter-terrorist financing (CTF) compliance, and involve verifying customer identities to prevent illegal activities. The fines could reach as high as 100 million won (about $93,000) per violation, which only adds to the exchange’s financial woes.
Upbit is also accused of carrying out transactions with overseas virtual asset operators that are not registered, which would violate the Special Financial Transactions Act. The exchange said it had not acted with intent and noted the difficulty of identifying unregistered operators on blockchain networks.
Upbit has until January 20 to provide a formal response to the FIU. A disciplinary hearing on Jan. 21 will finalize the period of suspension as well as the associated fines. The sanctions could also affect Upbit’s pending business license renewal, old since October 2024, which is still under review.
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