South Korea's largest cryptocurrency exchange, Upbit, faces scrutiny due to allegations of Customer Due Diligence (KYC) violations. The country's Financial Intelligence Unit (FIU) is set to hold a disciplinary hearing on January 21 to assess the exchange's regulatory compliance.
Assessing Upbit’s KYC Violations
The FIU will conduct a review meeting to evaluate over 500,000 potential KYC violations identified during an on-site inspection for the virtual asset service provider (VASP) license renewal. This marks the first hearing addressing the issues raised during the VASP renewal audit. Since August of last year, Upbit has been under investigation for KYC violations led by the financial regulatory authority. The FIU discovered that unauthorized customer verification procedures ranged between 500,000 and 600,000 during the license renewal process.
Crypto Regulatory Standards in South Korea
South Korea is making strides towards establishing a crypto-focused regulatory framework. The Financial Services Commission has initiated discussions on the second phase of crypto regulations, particularly concentrating on stablecoins and customer protection. The country’s efforts to combat rising crypto threats, particularly alongside the U.S. and Japan, demonstrate its commitment to user security. The three nations have released a document warning of threats posed by North Korean hackers targeting cryptocurrencies.
Impact on Global Cryptocurrency Norms
The FIU’s hearing on Upbit’s KYC violations is seen as a significant milestone in South Korea’s regulatory landscape. This meeting may also influence global cryptocurrency regulations and laws beyond South Korea’s situation. This development could serve as an important example for platforms in the sector regarding compliance with regulations for cryptocurrency exchanges.
The development of the Upbit case shows South Korea's increasing control over the cryptocurrency industry, which could have important implications for future regulatory initiatives in other countries.
