South Korea’s largest crypto exchange Upbit has reportedly received a suspension notice from the Financial Services Commission (FSC) for allegedly violating anti-money laundering (AML) and know-your-customer requirements (KYC).
Upbit faces suspension of up to 6 months
Thursday, the economic newspaper Maeil reported that South Korea’s Financial Intelligence Unit (FIU) has notified crypto exchange Upbit of possible sanctions for alleged violations of the Financial Transaction Information Act.
According to the report, Upbit failed to “fulfill its anti-money laundering obligations, including violating the KYC system,” which could result in a suspension of activity of up to six months.
The measure would prevent Upbit from registering new users for the duration of the suspension. However, existing customers would not be affected. “The sanction aims to prevent new customers from transferring cryptocurrencies outside the exchange for a certain period of time,” the exchange explained in a statement cited by the report.
Upbit has until January 20 to appeal to the FIU, as the regulatory agency will hold a hearing the next day to finalize the decision and set the duration of the sanction.
Mail Business also noted that the sanctions against Upbit could “rock other crypto exchanges” as they could be “interpreted as a reflection of the desire of financial authorities to correct the illegal and unfair market order that has been reported like a problem. in the virtual assets sector since the Virtual Assets User Protection Law came into force in July last year.
The country is entering the second phase of South Korea’s new crypto investor protection laws. The first phase focused on protecting customer deposits and combating unfair trading practices. Meanwhile, the second phase will focus on closing regulatory gaps related to the issuance and distribution of crypto assets.
South Korean crypto industry awaits sanctions
The crypto industry is reportedly interested in how the sanctions could affect the renewal of Upbit’s business license. Under the Special Money Act, virtual asset service providers (VASPs) must renew their licenses every three years.
Upbit’s license renewal process, which began in August, has raised questions within the financial community about its protracted timeline. According to previous reports, the extensive investigation by authorities affected the renewal of the license, which expired in October.
While reviewing the renewal of the exchange’s license, the FIU discovered large-scale cases of suspected violations of customer identification procedures. The financial authority has identified around 600,000 cases in which the KYC process was not properly followed.
The crypto exchange allegedly opened thousands of accounts without proper verification, failing to comply with anti-money laundering and anti-terrorism financing (CFT) requirements.
According to reports, Upbit could be fined up to 100 million won per case, worth around $68,000, which could cost $40 billion if all 600,000 cases are confirmed and convicted to a fine.
Additionally, the report states that the FIU allegedly imposed sanctions after determining that the crypto exchange was offering its services to unverified companies abroad. South Korean regulations stipulate that local exchanges can only transact with registered service providers.
Total crypto market capitalization is at $3.43 trillion in the one-week chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, chart from TradingView.com
