South Korea sanctions Upbit, restricting customer transactions
Upbit hit with regulatory sanctions as FIU cites 600,000 KYC violations.
South Korea’s Financial Intelligence Unit (FIU) has imposed a three-month suspension on new crypto deposits and withdrawals for Upbit customers.
The move comes as the FIU cites violations of regulations prohibiting exchanges from facilitating transactions with unregistered crypto asset service providers (CASPs), reports Cointeledraph.
Regulatory Clampdown and Alleged KYC Violations
The FIU announced the sanctions on February 25, following on-site inspections in 2024 that uncovered up to 600,000 breaches in client identification procedures at Upbit. In response, Upbit issued a public apology on its website, acknowledging the restrictions imposed on new customer transactions while assuring existing users that their access remains unaffected.
The exchange emphasized that the imposed measures might be subject to change through regulatory procedures, promising to update customers if the restrictions are suspended or modified. This development follows earlier warnings issued in January regarding potential punitive actions tied to alleged Know Your Customer (KYC) violations.
Market Impact and Future Prospects
Since the announcement of potential sanctions, Upbit’s daily trading volumes have fallen by approximately 70%, now totaling around $4.6 billion. Founded in 2017, Upbit is one of South Korea’s largest crypto exchanges and ranks 23rd globally by trust score on CoinGecko. The decline in trading activity reflects heightened regulatory scrutiny and has raised concerns among investors about the impact on market liquidity. With these measures in place, market participants are closely watching for any adjustments or clarifications from regulators, as well as potential changes in Upbit’s compliance practices that could restore investor confidence.
Looking ahead, Upbit is expected to engage in discussions with regulatory authorities to negotiate potential amendments to the sanctions. Analysts will be monitoring whether the FIU’s measures will lead to a broader industry shift in compliance standards or further disrupt trading activity. As the regulatory environment tightens in South Korea, Upbit’s ability to adapt could set an important precedent for crypto exchanges operating in the region.
Recently we wrote, that South Korea’s Financial Services Commission (FSC) has announced plans to lift its longstanding ban on corporate cryptocurrency trading.
