South Korean Regulator Issues Suspension Notice to Upbit

Highlights:

• South Korea’s FIU issues a suspension notice to Upbit for violating KYC and AML rules.
• Upbit could face suspension of up to six months, affecting new user activity and withdrawals.
• South Korea strengthens crypto regulations and collaborates with the US and Japan on security.

South Korea’s Financial Intelligence Unit (FIU) has issued a suspension notice to Upbit, the country’s largest crypto exchange, for violating Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Maeil Business Newspaper (MK) reported on Jan 16 that the FIU issued a preliminary warning to Upbit on January 9.

If confirmed, the exchange could face a suspension of up to six months, halting any new customer-related activities. Existing users can continue trading, but new users may be restricted from withdrawing virtual goods during the suspension period.

Upbit must submit a formal response to the FIU by January 20. A disciplinary hearing on January 21 will determine the suspension duration and any fines. These sanctions could also impact Upbit’s pending business license renewal, which has been under review since October last year.

Regulator Flags 700,000 KYC Violations

Under South Korea’s Special Financial Transactions Act, penalties for KYC violations can be up to 100 million Korean won (around $68,600) per case. Upbit has been found to have at least 700,000 KYC breaches. The Act also restricts local crypto companies from conducting transactions with unregistered crypto service providers. The Act also prohibits local crypto companies from transacting with unregistered crypto service providers. Reportedly, Upbit has also breached this rule by conducting business with unregistered crypto service operators.

Founded in 2017, the exchange holds a dominant 70% share of the local crypto market. According to The Block’s data dashboard, the crypto exchange Upbit ranked as the third-largest centralized exchange globally last month regarding trade volume, handling transactions worth more than $283 billion.

Upbit’s business license reportedly lapsed in October of the previous year, and its renewal application is still under review. In mid-November, FIU discovered 500,000 to 600,000 instances of unauthorized customer verification during the license renewal process. This included cases where accounts were approved despite having blurred names or registration numbers, making identification impossible.

South Korea Strengthens Crypto Regulations and Global Security Collaboration

South Korea is working to create a crypto-specific regulatory framework. Recently, the Financial Services Commission began discussions on the second phase of crypto regulations, focusing particularly on stablecoins and customer protection. 

South Korea’s New Crypto Regulations

The financial regulator of South Korea, prominently known as the Financial Services Commission has now reportedly started working on the second phase of the crypto rules to enhance user protection, as reported by a local news channel, EDaily.… pic.twitter.com/jl7PclT57G

— ICO Gem Hunters (@ICOGemHunters) January 15, 2025

South Korea, the US, and Japan teamed up to address rising crypto threats. The three countries recently released a joint paper warning about risks from North Korean-linked actors targeting crypto exchanges, custodians, and users. “Deeper collaboration among public and private sectors is essential to disrupt these malicious actors and secure the international financial system,” the joint statement read.

The three nations stress the importance of public-private sector collaboration in fighting cybercrimes. Moreover, on December 26, the South Korean government announced sanctions against 15 North Korean IT personnel and one associated organization for their involvement in illegal cyber activities, including cryptocurrency thefts.