Upbit Faces South Korea Ban Over Crypto AML and KYC Violations

South Korea’s financial regulators have taken a significant step by notifying upbit upbit - cs@upbit.com Centralised Exchange , the country’s largest virtual asset exchange, of a possible suspension of its business operations. The move comes amid allegations that the platform failed to meet anti-money laundering (AML) standards and violated customer identification (KYC) requirements.

This decision could have a major impact on the domestic crypto market.

Sanctions and Allegations: The Key Issues

The Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) issued a preliminary notice of sanctions to Upbit on January 9. The charges involve breaches of the Specific Financial Transaction Information Act, which enforces strict AML and KYC compliance.

If the sanctions are imposed, Upbit will be prohibited from onboarding new customers for up to six months. During this period, new users will also be restricted from transferring virtual assets outside the platform.

However, existing users will still be able to trade, allowing the platform to continue some operations. Given that Upbit handles over 70% of South Korea’s crypto trading volume, the potential consequences are considerable.

Next Steps: Upbit’s Response and the FIU Hearing

Upbit has until January 20 to provide a formal response to the sanctions. The FIU will then hold a hearing on January 21 to finalize its decision, including the length of the suspension. This gives the exchange a short window to defend its practices and potentially reduce the severity of the penalties.

• Also Read :
•   BitMEX Fined $100 Million for Anti-Money Laundering Violations; What Went Wrong?
• ,

Broader Impact on the Crypto Industry

These sanctions come on the heels of South Korea’s Virtual Asset User Protection Act, introduced in July, which emphasizes curbing illegal and unethical practices in the virtual asset industry. The strict action against Upbit has sparked concern among other exchanges, highlighting the increasing regulatory pressure in the sector.

The sanctions may also affect Upbit’s ability to renew its business license. Although the exchange’s license was renewed in October 2023, the ongoing regulatory review and these allegations could create challenges for its future compliance status.

Violations Uncovered During the Investigation

The FIU’s investigation uncovered approximately 700,000 cases where Upbit failed to properly implement KYC procedures. Additionally, the exchange was accused of conducting transactions with unregistered overseas virtual operators. These violations could result in hefty fines, as the Special Financial Transactions Act allows penalties of up to 100 million won per infraction.

An Upbit spokesperson acknowledged the difficulty of identifying unregistered overseas exchanges on the blockchain but noted that efforts are underway to address these compliance issues.

The outcome of the January 21 hearing will likely set an important precedent for how South Korea’s authorities approach similar cases in the future.