South Korea’s Bithumb Faces Six-Month Partial Suspension Over AML Violations

Crypto rules in South Korea are tightening as regulators target major exchanges. Bithumb, the country’s second-largest crypto exchange, is facing a possible six-month partial suspension after regulators accused it of breaking AML and KYC rules.

The decision could limit services like deposit and withdrawal, mainly for new users joining the exchange.

Bithumb Faces Six-Month Partial Suspension

The Financial Intelligence Unit, operating under the Financial Services Commission, issued the notice to Bithumb. Authorities claim Bithumb may have failed to properly enforce Know-Your-Customer (KYC) and anti-money-laundering (AML) checks required under the Special Financial Transactions Act.

Regulators raised concerns that Bithumb dealt with overseas crypto operators without properly reporting them to authorities.

Because of these issues, the FIU has proposed a six-month partial business suspension along with disciplinary action against the company’s chief executive.

In response to this, Bithumb officials said the case remains under review and regulators will decide during the March 16 sanctions meeting.

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Restrictions Likely to Affect New Users Only

If the sanction is confirmed, the suspension will mainly affect new users joining the Bithumb platform. According to industry reports, restrictions would likely block new users from transferring crypto assets for up to six months.

Meanwhile, existing users, however, would still be able to deposit and withdraw Korean won and continue normal crypto trading on the platform. 

This approach is similar to penalties imposed on other exchanges in the country. Last year, regulators fined Dunamu, the operator of Upbit, 35.2 billion won (about $26 million) and imposed a three-month partial suspension.

Another local exchange, Korbit, was also fined 2.73 billion won (around $2 million) for compliance failures.

South Korea Tightens Oversight of Crypto Platforms

The investigation comes as South Korea increases oversight of the digital asset industry. The country introduced stricter crypto rules after the 2022 collapse of the Terra ecosystem, created by Do Kwon, which wiped out more than $40 billion in market value globally.

In July 2024, South Korea also launched the Virtual Asset User Protection Act, forcing exchanges to improve AML monitoring, separate customer funds, and report suspicious transactions.

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