South Korea’s Financial Intelligence Unit (KoFIU) sent a preliminary notice to Bithumb for a six-month partial suspension of activity, sparking an important debate in the country’s cryptocurrency market. This step, which came to the fore due to the deficiencies detected in anti-money laundering and customer identity verification practices, has the potential to closely affect the functioning of the market and price formation.
Sanctions on Bithumb Shake the Market Balance
Bithumb operates as the largest crypto exchange in South Korea after Upbit. Following the recent technical difficulties and incorrect balance uploads, the transaction volume and reliability of the platform began to be questioned. The sanction proposed by KoFIU specifically aims to limit the external transfer transactions of new users. However, existing customers will be able to continue trading and depositing in Korean won as normal.
Due to a technical glitch in February, 620 thousand Bitcoins were accidentally uploaded to Bithumb users. This event caused the Bitcoin/KRW price to briefly drop 17 percent on the platform; Although prices recovered quickly, the incident revealed structural weaknesses. Regulators emphasized that such errors create vulnerability in the market infrastructure.
Competition and Centralization Risks are in the Foreground
Bithumb and Upbit together control 96 percent of domestic crypto volume. This causes a restriction on anyone to create a ripple effect across the industry. According to CoinGecko data, Upbit’s market share is 58.4 percent and Bithumb’s share is 24.8 percent. Following the news of sanctions on Bithumb, the money flow to Upbit accelerated and market concentration increased.
This concentration also affects the stability of the price difference known as the “kimchi premium”, which causes Korean prices of crypto assets, especially Bitcoin, to deviate from global prices. This difference, which was recorded above 10 percent in March 2024, decreased to less than 1 percent at the beginning of 2026.
Expanding Effects of Regulation and the Kimchi Premium
The partial suspension decision against Bithumb affects not only this exchange but also the general market mechanism. In particular, transaction restrictions for new users make it difficult to directly reflect the trends of retail investors in market prices and weaken the reliability of the kimchi premium.
Similar examples have been seen on the market before. The three-month suspension and fine imposed on Upbit, the administrative sanctions received by Korbit, and the fact that Coinone and Gopax are also under investigation show that South Korean regulators are trying to strengthen their authority over the sector.
While the market is opening up to institutional investors, auditing and reporting standards continue to be tightened. In particular, measures against money laundering have become a pressure element that spreads throughout the sector.
The tendency of market actors to move capital abroad seems to have accelerated recently. According to estimates by Tiger Research and CoinGecko, approximately 160 trillion won worth of crypto assets moved from Korean exchanges to overseas platforms in 2025.
It is predicted that if Bithumb’s market share declines further, the connections between domestic price signals and the global crypto market may further weaken and the reliability of the kimchi premium may decrease. It is reported that South Korea’s steps to regulate the sector are redefining the balance between market transparency and trust.
