Upbit’s Local License Renewal Sparks Investigation
South Korea’s Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) has identified at least 500,000 to 600,000 potential KYC violations by the Upbit exchange, a major South Korean cryptocurrency exchange. This report comes amid its local license renewal and may affect the exchange’s operations.
Upbit Allegedly Accepted Blurred IDs for KYC
In South Korea, cryptocurrency exchanges or virtual asset service providers (VASPs) are obligated to establish strict KYC procedures. In January 2018, the South Korean government sought to regulate crypto trading by allowing such trading only from real-name bank accounts. After beefing up the regulations, the FSC introduced a mandatory registration process for all crypto exchanges, ensuring they comply with KYC and Anti-Money Laundering (AML) protocols.
According to the Maeil Business Newspaper report, the FIU identified many cases where Upbit reportedly did not follow KYC procedures. For example, Upbit allegedly allowed users to open accounts using IDs with blurred personal data such as names and registration numbers, which didn’t allow regulators to properly identify them.
Potential Fines and Impact on Business License Renewal
Due to the alleged customer verification violations, Upbit reportedly faces fines of 100 million Korean won ($71,500) per case, in addition to possible issues with Upbit’s business license renewal. This news comes a month after the FSC announced plans to investigate the exchange for potential anti-monopoly breaches.
Upbit’s Monopoly Investigation
Founded in 2017, Upbit is one of the largest crypto exchanges in South Korea and globally, trading $2.2 billion daily, according to CoinGecko. The disclosure of Upbit’s alleged KYC issues highlights concerns about the exchange’s operations and potential impact on its business license renewal.
Background: FSC’s Investigation into Upbit
In November 2023, local reports indicated that as much as 70% of K-Bank’s deposits were linked to crypto exchanges. This raised concerns about the high exposure of K-Bank to crypto-related risks. In mid-October, according to Bloomberg, K-Bank withdrew its $732 million initial public offering (IPO) in Seoul amid concerns over high valuation and dependency on a cryptocurrency operator for its funding.
Legal Issues Surrounding Upbit’s Operations
The FSC’s investigation into Upbit’s alleged KYC violations is part of a broader effort to regulate the crypto market in South Korea. The country has been working to strengthen regulations and ensure that exchanges comply with strict KYC and AML protocols.
Timeline of Events:
- January 2018: The South Korean government introduces regulations allowing crypto trading only from real-name bank accounts.
- Upbit is founded in 2017, becoming one of the largest crypto exchanges in South Korea and globally.
- November 2023: Local reports indicate that as much as 70% of K-Bank’s deposits are linked to crypto exchanges.
- Mid-October 2023: K-Bank withdraws its $732 million IPO in Seoul amid concerns over high valuation and dependency on a cryptocurrency operator for funding.
Impact on Upbit’s Operations
The FSC’s investigation into Upbit’s alleged KYC violations may impact the exchange’s business license renewal. If found guilty, Upbit may face fines of 100 million Korean won ($71,500) per case, in addition to possible issues with its business license.
Conclusion:
Upbit’s alleged KYC issues highlight concerns about the exchange’s operations and potential impact on its business license renewal. The FSC’s investigation into Upbit’s alleged violations is part of a broader effort to regulate the crypto market in South Korea.
