Upbit, South Korea’s leading virtual asset exchange, is facing a suspension of its business operations due to alleged non-compliance with anti-money laundering (AML) regulations and breaches of the KYC system.
According to a local news report, The Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) issued a preliminary notice on January 9 regarding sanctions against Upbit for violations of the Specific Financial Transaction Information Act. If finalized, the penalties could suspend Upbit’s business activities, restricting it from onboarding new customers and facilitating external virtual asset transfers for up to six months. However, existing customers would remain unaffected and continue trading. Upbit, which holds over 70% of South Korea’s crypto trading volume, referred to the sanctions as a limitation on new customer transactions involving external transfers.
Upbit has until January 20 to submit its defence to the FIU. The FIU will hold a disciplinary hearing on January 21 to finalize the sanctions, including the duration of any suspension.
Similarly, the FSC has reportedly initiated the second phase of discussions on the country’s crypto regulations, the Virtual Asset User Protection Act. During a recent meeting in Seoul, FSC Vice Chairman Kim So-young emphasized the importance of keeping up with global regulatory trends. He highlighted examples such as the EU’s MiCA framework and similar initiatives in Hong Kong, Singapore, and the United States.
The sanctions against Upbit are linked to an ongoing review of its business license renewal, which has been under scrutiny since October 2023. The Financial Intelligence Unit (FIU) investigation revealed over 700,000 instances of inadequate Know Your Customer (KYC) practices during inspections conducted in 2023. Violating customer verification laws can lead to fines of up to 100 million won ($71,500) per occurrence. The FIU accused Upbit of engaging with unregistered foreign virtual asset operators, violating the Special Financial Transactions Act. Upbit argued that identifying unregistered operators on the blockchain in advance is challenging.
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