South Korea’s leading cryptocurrency exchange, Upbit, must suspend its operations following accusations by the country’s financial regulators of failing to meet anti-money laundering (AML) obligations.
The regulator added that the firm’s Know-Your-Customer system didn’t meet stipulated guidelines. This move marks a significant development for the country’s crypto industry, as Upbit controls 70% of the nation’s crypto market.
Upbit’s Sanctions Will Affect New Customers
The Financial Intelligence Unit (FIU), a Financial Services Commission subsidiary, notified Upbit on Jan. 9th of the potential sanctions for breaching the Specific Financial Transaction Information Act (SFTIA). If the FIU imposes these sanctions, South Korea’s leading crypto exchange will be restricted from onboarding new customers for up to six months.
The sanction would prevent new customers from transferring their crypto assets outside the platform. However, existing customers will still be able to trade.
Upbit has until Jan. 20th to submit its response to the allegations. A court hearing has been scheduled for Jan. 21st to finalize the sanction’s details, including the duration of the suspension.
Industry Reforms and Regulatory Oversight
This suspension has led to concerns among other crypto firms in South Korea as they realize that financial authorities are increasing their focus on crypto firms to end illegal and unethical practices in the local crypto market. FIU’s move is part of implementing the Virtual Asset User Protection Act, which was introduced in July.
The outcome of the sanctions could also affect the crypto platform’s upcoming business license renewal. The regulator renewed Upbit’s license in Oct. 2023, but its renewal for the next two years is still under review, pending the outcome of the current allegations.
The FIU launched an investigation into Upbit’s compliance status in late August, where it discovered that the crypto platform did not adequately conduct 700,000 customer verifications. The regulator also found that the exchange conducted business transactions with overseas crypto platforms with no license to operate in the country.
These regulatory breaches could result in fines of up to 100 million won per violation under the SFTIA. An Upbit representative explained that it was difficult to identify unregistered overseas exchanges.
Disclaimer
This article is provided for information only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
