South Korean Crypto Giant Upbit Under Scrutiny for Massive KYC Violations
South Korea’s largest cryptocurrency exchange, Upbit, faces a major regulatory challenge as authorities have uncovered hundreds of thousands of potential Know Your Customer (KYC) violations during a routine license renewal review. The Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) has identified between 500,000 and 600,000 cases where the exchange allegedly failed to properly implement customer verification procedures.
According to the Maeil Business Newspaper, the violations include instances where Upbit approved user accounts with blurred identification documents, potentially compromising anti-money laundering (AML) safeguards. These irregularities were discovered during on-site inspections conducted by the FIU since late August as part of Upbit’s mandatory three-year license renewal process.
The scale of the alleged violations could have severe financial implications for the exchange. Under South Korean law, each KYC breach could result in fines of up to 100 million won ($71,500) per case. More critically, these findings might jeopardize Upbit’s license renewal, threatening its operations in the country’s crypto market where it holds a dominant position.
When approached for comment, an Upbit representative cited restrictions under the Special Financial Transaction Information Act, stating that information about ongoing FIU investigations cannot be shared, even internally within the company.
The investigation comes at a particularly sensitive time for Upbit, which processes substantial trading volumes. Ranked fifth among global spot exchanges on CoinMarketCap, the platform handled over $7.7 billion in trading volume in the past 24 hours and processed more than $48.2 billion in transactions during October alone.
This scrutiny follows FSC Chair Kim Byung-hwan’s recent announcement of plans to investigate the monopolistic structure of South Korea’s crypto exchange market. The regulatory body has also expressed concerns about Upbit’s close relationship with K-Bank, where crypto-related deposits reportedly account for a significant portion of the bank’s total deposits.
As authorities continue their detailed review of the suspected violations, the outcome could reshape the landscape of South Korea’s cryptocurrency market, where Upbit has maintained a commanding presence since its founding.
Photo by Daniel Bernard on Unsplash
