In a latest development, the financial authorities have notified Upbit, the leading virtual asset exchange in South Korea, of a suspension of its business operations. This action follows allegations of the platform’s failure to comply with anti-money laundering (AML) obligations, including violations of the customer identification system (KYC).
According to the financial sector on the 16th, the Financial Intelligence Unit ( FIU ) of the Financial Services Commission notified Upbit in advance on the 9th of sanctions centered on a suspension of business concerning violations of the Specific Financial Transaction Information Act.
Upbit Faces Potential Sanctions Impacting New Customer Transactions
If confirmed, the sanctions will prevent Upbit from engaging with new customers for up to six months, specifically restricting new customers from transferring virtual assets outside the platform. However, existing customers will still be able to trade. Upbit, which holds over 70% of South Korea’s domestic virtual asset trading market by volume, faces significant impact from these sanctions.
Upbit has until January 20th to submit its response to the sanctions. After reviewing Upbit’s explanation, the FIU will hold a hearing on January 21st to finalize the sanctions, including the suspension period.
Financial Authorities’ Push for Market Reform
The stringent sanctions on Upbit have drawn attention from other virtual asset exchanges, which reflects the financial authorities’ commitment to addressing illegal and unfair practices in the market, especially after the Virtual Asset User Protection Act was introduced in July.
The industry also watches how this sanction will affect Upbit’s future business license renewal review. The license must be renewed every three years, but Upbit’s license was renewed in October of last year and is currently under review.
The FIU conducted inspections of Upbit’s business license renewal applications from late August last year and found 700,000 cases where KYC (customer verification) was not properly done. The virtual asset industry is focused on the potential fines, as the Special Financial Transactions Act allows fines of up to 100 million won per violation. The FIU also found that Upbit violated rules by doing business with unreported overseas virtual operators, leading to sanctions. An Upbit official explained that it was difficult to identify unreported overseas exchanges on the blockchain.
