South Korea's top financial regulator, the Financial Services Commission (FSC), is preparing to impose heavy sanctions on Upbit over multiple violations of Know Your Customer (KYC) regulations.
Regulatory Pressure on Upbit
According to reports, the investigation launched by the FSC in November 2024 accuses Upbit of failing to properly verify customer identities, a critical measure for user protection against financial crimes. The exchange is also suspected of facilitating transactions with unlicensed platforms. In response, the FSC has proposed significant penalties, with potential fines reaching tens of billions of won. Each violation could cost Upbit up to $68,600. Korean Times reports that the FSC may impose operational restrictions, including temporary suspensions or limits on new user registrations.
Impact on the Crypto Industry
The crackdown on Upbit is causing concern across the country's broader crypto industry. Other major exchanges such as Korbit, GOPAX, Bithumb, and Coinone have also been subject to inspections. An industry representative remarked, 'If a major player like Upbit faces sanctions, smaller exchanges will inevitably feel even greater pressure.' This heightened regulatory environment follows the implementation of South Korea’s new Virtual Asset User Protection Act, effective from July 2024.
Upbit's Compliance History
Despite current allegations, Upbit has been regarded as a compliance leader, having first registered under South Korea’s revamped regulatory framework in 2021, and pioneered real name verification for crypto transactions. However, its latest legal troubles indicate a shift toward stricter enforcement.
The ongoing scrutiny of Upbit and its parent company, Dunamu, will determine its future and shape compliance expectations within the industry. Despite this, South Korean banks have continued their partnerships with Upbit.
