South Korea’s Upbit Under Fire for 600,00 KYC Scandal

South Korea’s Financial Intelligence Unit (FIU) is currently investigating Upbit, the country’s largest cryptocurrency exchange, for over 600,000 alleged violations of Know Your Customer (KYC) regulations. This probe comes at a critical time as Upbit seeks to renew its business license, which could have major implications for its operations and the broader crypto market in South Korea.

But the investigation doesn’t stop at KYC issues—Upbit’s market dominance and its ties to one of the country’s largest banks are also under scrutiny.

What does this mean for the exchange and the future of crypto in the country? Keep reading to find out.

KYC Issues: What Went Wrong?

Reports reveal that Upbit allegedly accepted ID submissions that didn’t meet South Korea’s strict KYC standards. These violations reportedly amount to more than 500,000 cases where proper identity verification was not conducted.

KYC regulations are critical for preventing money laundering and terrorism financing. In South Korea, crypto exchanges are required to ensure users open real-name accounts and complete KYC checks before trading or withdrawing funds. The FIU began reviewing Upbit’s license renewal in August, uncovering these lapses during its inspection.

Monopoly Fears Add Pressure

Upbit’s dominance in the market has also attracted regulatory scrutiny. The Financial Services Commission (FSC) recently launched an anti-monopoly investigation into Upbit’s partnership with K-Bank, its primary banking partner.

K-Bank, which reportedly relies on crypto for 70% of its deposits, has faced questions about its heavy dependence on Upbit. These concerns recently led K-Bank to cancel its $732 million initial public offering (IPO), which would have been South Korea’s largest since 2022.

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Crypto Impact

Upbit commands a staggering 70% market share in South Korea’s crypto sector and processes $2.2 billion in daily trading volume. The exchange earns substantial revenue through transaction fees, charging 0.05% for regular orders and 0.139% for pre-orders in the South Korean won market.

Its dominance in the crypto space positions Upbit as a key player, but the ongoing investigations could disrupt its operations and significantly impact South Korea’s crypto industry.

The stakes are high for Upbit and the entire crypto ecosystem in South Korea. Stay tuned for updates.