Regulatory Scrutiny Escalates for Upbit Amid KYC and AML Breaches

South Korea's largest cryptocurrency exchange, Upbit, is currently facing stringent regulatory action. After being accused of breaching over 700,000 Know Your Customer (KYC) and Anti-Money Laundering (AML) mandates, Upbit is under the threat of operational suspension.

According to reports from local media dated January 16, 2025, the Financial Intelligence Unit (FIU), a sector of South Korea’s Financial Services Commission (FSC), has dispatched a notice for suspension against Upbit. The proposed measure includes a six-month halt on new user registrations.

Allegations: A Massive Compliance Breach

🚨 Financial Authorities Impose Business Suspension on Upbit 🚨

1/ Breaking: South Korea’s Financial Intelligence Unit (FIU) has issued a preliminary suspension order against Upbit—Korea’s largest crypto exchange—over alleged KYC/AML non-compliance. If confirmed on Jan 21, Upbit…
— BLOCKMEDIA(블록미디어) (@with_blockmedia) January 16, 2025

The allegations detail that Upbit inadequately verified the identities of a significant number of accounts, between 500,000 and 700,000, in violation of the Special Financial Transactions Act in South Korea. Each infraction could incur fines up to 100 million Korean won (approximately $68,600), potentially leading to severe penalties totaling $34.3 billion, emphasizing the seriousness of the violations.

Additionally, regulators allege that Upbit traded with unregistered foreign cryptocurrency service providers, intensifying its legal entanglements.

Upbit must respond to the FIU’s claims by January 20, 2025, prior to the final assessment slated for January 21. Given the immense implications, the exchange is expected to robustly defend its position.

As of July 2024, the Virtual Asset User Protection Act came into effect, imposing enhanced compliance regulations for crypto exchanges, including more rigorous KYC/AML practices.

Looking Ahead: Corporate Involvement in Crypto

Recently, the FSC expressed intentions to permit corporate investments in digital assets. Secretary-General Kwon Dae-young stated during a briefing in 2025, “We need to discuss how to create listing standards, what to do with stablecoins, and how to establish rules for virtual asset exchanges.” He further remarked that alignment with global regulations in the virtual asset sector is essential.

Plans also encompass raising the limit for corporate acquisitions in non-subsidiary entities from 5% to 15%, thereby allowing larger corporations to exercise greater operational authority. Furthermore, regulations regarding consignment businesses are expected to be relaxed, along with improved data-sharing protocols within financial holding groups, contributing to a more regulated and fair trading environment.