Upbit, has come under regulatory scrutiny, with the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) issuing a notice to suspend its business operations. The move stems from allegations of serious breaches in know-your-customer (KYC) and anti-money laundering (AML) compliance.

Deadline Looms for Upbit

Upbit has until January 20, 2025, to respond to the suspension notice, with the final decision expected the following day, January 21. If enforced, the suspension could halt new user registrations for up to six months, though existing users would retain access to the platform’s services.

The exchange also faces hefty fines under the Special Financial Transactions Act, with penalties reaching up to 100 million won (approximately $68,500) per violation. Given the scale of alleged breaches, fines could escalate to a staggering 34 billion won ($23.3 million).

KYC Violations at Scale

The FIU’s investigation revealed over 500,000 accounts on Upbit that reportedly violated KYC standards. Among these were accounts with ID documents containing blurred or illegible photos, raising concerns over fraudulent activity and identity theft.

Upbit’s dominance in the South Korean market has also drawn regulatory attention. Authorities fear the exchange may be leveraging its position to stifle competition, prompting further scrutiny of its partnerships and practices.

Potential Fallout for K-Bank Partnership

Upbit’s collaboration with K-Bank, its primary banking partner, has also come under the microscope. Notably, customer funds from the exchange constitute around 20% of K-Bank’s total deposits. Regulators worry that any disruption to Upbit’s operations could trigger a bank run, posing broader risks to the financial system.

A Leader Under Pressure

Since its establishment in 2017, Upbit has grown to become the sixth-largest cryptocurrency exchange globally by trading volume, recording over $8 billion in the past 24 hours alone. Despite its success, the exchange has faced increasing regulatory challenges, from monopoly concerns to AML violations.

The upcoming decision by South Korean authorities marks a pivotal moment for Upbit and could signal broader enforcement actions in the nation’s rapidly growing crypto market.