Key Takeaways
- Upbit’s parent company filed a suit to put a stay on 3-month business suspension orders by the FIU.
- FIU has sanctioned Upbit, the country’s largest crypto exchange, for KYC violations.
- The three-month penalty bars the platform from offering deposit and withdrawal services to new customers.
Earlier this week, the Financial Intelligence Unit (FIU) imposed sanctions on Upbit, South Korea’s largest crypto exchange, citing failures in customer identity verification and accusing its operator, Dunamu, of monopolistic practices.
The exchange now seeks to challenge the decision, setting up a legal battle that could shape South Korea’s crypto regulations.
Upbit Challenges Sanctions, Files Suit Against Regulators
Days after being sanctioned, Dunamu petitioned the Seoul Administrative Court to overturn the FIU’s three-month business suspension, arguing that it has addressed regulatory concerns and corrected its know-your-customer (KYC) compliance issues.
“We made our decision carefully, and it is difficult to discuss specific details,” a Dunamu spokesperson said. “We will present our case fully during the trial.”
In recent months, Upbit has faced mounting regulatory scrutiny, with authorities citing concerns over its market dominance and deficiencies in user verification procedures.
The outcome of the lawsuit could have significant implications for South Korea’s broader crypto regulatory landscape.
FIU Tightens Oversight Amid Compliance Failures
The FIU’s enforcement measures stem from violations of the Specific Financial Information Act, which mandates that virtual asset exchanges verify customer identities and report financial transactions accurately.
Regulators found that Upbit had processed transactions for users who submitted blurry or incomplete identification documents, leading to 34,777 KYC violations.
Additionally, the FIU flagged 5,785 instances where users provided incomplete or incorrect address details.
Authorities also discovered that Upbit, along with other global exchanges like MEXC and KuCoin, facilitated 44,948 virtual asset transfers with 19 unregistered foreign virtual asset service providers—a direct violation of compliance laws.
“Given the strict sanctions imposed for violations of the Act on Reporting and Using Specified Financial Transaction Information, virtual asset businesses must ensure full compliance with their obligations under the law,” an FIU official stated.
Upbit Pushes Back, Plans to Appeal FIU’s Decision
Upbit has rejected the FIU’s findings, stating that it has already made the necessary compliance improvements and that regulators have failed to consider key factors.
The exchange plans to challenge the ruling through official legal channels, arguing that the imposed restrictions are excessive.
In a statement published by Yonhap News, Upbit assured users that once the FIU lifts the sanctions, new customers will regain full access to its services.
Regulatory Scrutiny Increases as Penalties Loom
This latest penalty adds to Upbit’s ongoing regulatory troubles. In November 2024, the Financial Services Commission (FSC), the country’s financial regulator, flagged the exchange for KYC violations, warning that non-compliance could lead to fines and operational restrictions.
If further violations are found, Upbit could face penalties reaching $34 billion, according to estimates from regulatory analysts.
With South Korea tightening its grip on crypto regulations, exchanges are under growing pressure to align with compliance mandates—or risk severe consequences.
Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
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