South Korea's largest cryptocurrency exchange, Upbit, is under investigation following allegations of Know Your Customer (KYC) procedure violations raised by the Financial Intelligence Unit (FIU).
KYC Violation Allegations
The Financial Intelligence Unit (FIU) discovered between 500,000 and 600,000 violations during Upbit's license renewal process. These violations include blurred names and incomplete data in the provided documents. Despite these flaws, these accounts were approved, raising concerns about potential money laundering and criminal activities.
Impact on License and Potential Fines
Under South Korea’s Special Financial Information Act, virtual asset service providers must renew their licenses every three years. Non-compliance with KYC can result in fines up to 100 million won ($71,500) per violation. Given the number of alleged violations, potential fines could reach millions. The FIU's decision will determine whether Upbit retains its license and continues operations.
Context and Market Implications
This investigation follows an anti-monopoly probe against Upbit by the Financial Services Commission (FSC). The exchange's close ties with K-Bank, which handles up to 70% of crypto-related deposits, have triggered regulatory concerns. Concurrently, K-Bank canceled its $732 million IPO in October. With Upbit processing over $2 billion in daily trades, the FIU's decision will not only shape Upbit’s future but also set a precedent for regulatory enforcement in South Korea's crypto industry.
The FIU's investigative results and the decision on Upbit's license will be significant for South Korea's cryptocurrency industry, setting standards for regulatory compliance.
