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South Korea’s Upbit Faces Regulatory Scrutiny After KYC, AML Violations

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South Korea’s largest cryptocurrency exchange, Upbit, is under intense regulatory scrutiny. After being accused of violating more than 700,000 Know Your Customer (KYC) and anti-money laundering (AML) obligations, Upbit is facing suspension.

According to local media reports published on January 16, 2025, the Financial Intelligence Unit (FIU), a division of South Korea’s Financial Services Commission (FSC), issued a notice of suspension of the Upbit service.

The authorities propose to impose a six-month ban on registering new users.

Explore: South Korea Doesn’t Want to Be Mysterious About Cryptocurrencies Anymore! The head of the stock exchange calls for institutionalization

Allegations: Massive breach of compliance

The FIU alleges that Upbit failed to properly verify the identities of between 500,000 and 700,000 accounts, a critical requirement under South Korea’s Private Financial Transactions Law.

This law enforces strict KYC compliance to prevent money laundering and other financial crimes.

Each violation could result in fines of up to 100 million Korean won (about $68,600), potentially exposing Upbit to penalties totaling $34.3 billion — a staggering amount that underscores the seriousness of the allegations.

In addition, regulators allege that Upbit conducted transactions with unregistered foreign cryptocurrency service providers, exacerbating its legal problems.

Upbit has until January 20, 2025 to respond to the FIU’s allegations before making a final decision on January 21. The stock market is expected to present its case forcefully, given the high risks it entails.

In July 2024, the Virtual Assets User Protection Act was implemented, which introduced stricter compliance requirements for cryptocurrency exchanges. This includes enhanced KYC/AML measures, protection of user deposits, and mandatory reporting of suspicious transactions.

Related: South Korea Postpones 20% Cryptocurrency Tax for Third Time, Due to Regulatory Improvement

South Korea’s FSC opens the door to corporate investments in crypto assets

Recently, the Financial Services Commission (FSC) in South Korea announced its intention to allow companies to invest in digital assets.

FSB Secretary General Kwon Dae-young announced the move at a press conference in 2025. “We need to discuss how to create listing standards, what to do with stablecoins, and how to create codes of conduct for virtual asset exchanges,” he said.

He also added: “We will work to comply with global regulations in the virtual assets market.”

The proposed changes extend beyond cryptocurrency investments. Current regulations allow companies to hold up to 5% equity in unaffiliated entities. The Financial Services Commission plans to increase this limit to 15%, to enable companies to exercise greater operational control. In addition, there are plans to ease shipping business regulations and enhance data sharing mechanisms within financial holding groups.

The new framework also seeks to create a code of conduct for virtual asset exchanges, ensuring a fair and transparent trading ecosystem.

Related: South Korea’s Financial Services Commission (FSC) opens the door to corporate investments in crypto assets

The post South Korea’s Upbit Faces Regulatory Scrutiny After Know Your Customer, Anti-Money Laundering (AML) Violations appeared first on 99Bitcoins.

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