Upbit, is under scrutiny after receiving a suspension notice from the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC). The allegations center around non-compliance with know-your-customer (KYC) standards and anti-money laundering (AML) obligations.
Regulatory Crackdown on Upbit
The FIU has ordered Upbit to address the violations, granting the exchange until 20 January 2025 to respond. A final decision on the matter is expected on 21 January 2025. Should the suspension move forward, Upbit will face a ban on new user registrations for up to six months. However, existing users will still be able to trade on the platform during this period.
Under South Korea’s Special Financial Transactions Act, Upbit could face a fine of up to ₩100 million (approximately $68,500) per violation. With over 500,000 alleged infractions, the potential penalties could exceed ₩34 billion ($25.7 million).
Investigations Reveal Massive KYC Failures
The FIU’s investigation into Upbit began after reports surfaced about widespread KYC violations. Authorities discovered more than 500,000 accounts with irregularities, including identification documents with blurred or unrecognizable images.
These lapses have raised serious concerns about Upbit’s ability to ensure secure and compliant operations. The findings also underscore the government’s increased focus on tightening regulations in the rapidly growing cryptocurrency sector.
Fears of Monopoly and Market Dominance
This isn’t the first time Upbit has faced regulatory heat. Its overwhelming market dominance—accounting for a significant share of South Korea’s crypto trading—has sparked fears of monopolistic practices.
With trading volumes exceeding $8 billion in the past 24 hours, Upbit ranks as the sixth-largest exchange globally. Its partnership with K-Bank, a key banking partner, has also raised eyebrows. Upbit customer funds make up approximately 20% of K-Bank’s total deposits, prompting concerns about potential risks to the bank’s stability. A disruption in Upbit’s operations could trigger a bank run, jeopardising financial stability.
What’s Next for Upbit?
Upbit’s response to the FIU notice will play a critical role in determining its future. If the suspension is enforced, it could shake South Korea’s crypto market and raise questions about the regulatory landscape.
With the final verdict looming, Upbit faces mounting pressure to address the allegations and safeguard its reputation in a competitive and highly regulated industry.
