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South Korea’s Upbit in Regulatory Hot Water Over Alleged Blurred IDs

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Prashant Jha
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Key Takeaways

  • South Korea’s largest crypto exchange runs into regulatory troubles over KYC violations.
  • Financial regulators identified over 500,000 accounts in violation of KYC norms.
  • Many of these accounts offered blurred or unrecognizable IDs.

South Korea’s largest crypto exchange, Upbit, has run into hot regulatory waters amid license renewal. 

According to reports  published by local news, Upbit allegedly violated Know Your Customer (KYC) regulations and faces potential penalties amounting to millions of dollars.

Upbit Faces Investigation Over Blurred IDs

The South Korean government reportedly found over 500,000 crypto accounts violating the platform’s KYC norms. Many IDs submitted for verification were either blurred or unrecognizable.

The report noted that the Financial Services Commission (FSC), the country’s financial regulator, identified many suspected violations of customer verification obligations during the business license renewal review process.

The FSC is currently assessing the scale of the KYC fraud. In South Korea, virtual asset service providers must renew their licenses every three years. 

The large-scale violation was reportedly discovered during one of the on-site inspections for the license renewal process.

Upbit Could Face Hefty Fines

Since the renewal review process has been ongoing for over three months, there have been rumors of a potential impending investigation into the exchange.

It is unclear at the moment how many cases were found to be in violation of KYC requirements.

According to the Special Financial Transaction Information Act, a fine of up to 100 million won ($72,000) per case can be imposed for violations of customer verification obligations.

The recent investigation into Upbit’s alleged violations of the KYC norm isn’t the first for the crypto platform.

Upbit Faces Mounting Regulatory Pressure

The exchange is currently the largest in Korea, with over 80% market share, and lawmakers in the opposition have called for government interference in breaking the monopoly.

The country’s financial regulator began investigating Upbit’s monopoly in October this year. Monopoly concerns grew as its banking partner, K-Bank, filed for an IPO.

K-Bank offers a 2.1% interest rate to Upbit customers while its operating profit margin hovers below 1%, raising financial concerns as the bank is set to go public.

The FSC chairman acknowledged the concerns and assured the financial regulator would thoroughly investigate the relationship between the largest crypto exchange and K-Bank.

South Korea is considered one of the pro-crypto countries with a strict regulatory policy. Crypto platforms can operate with a license but face heavy scrutiny, especially following the collapse of Terra Luna.

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Prashant Jha

Prashant Jha is a crypto-journalist focused on the US and UK markets, his interests lie in blockchain technology and crypto adoption across emerging economies.
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