Upbit Exchange Faces Watchdog Probe In South Korea: Details

Upbit, South Korea’s largest crypto exchange, could face severe sanctions from the country’s Financial Intelligence Unit (FIU) of the Financial Services Commission. According to a local report, the FIU will, on January 21, hold a sanctions review committee for Upbit.

Regulatory Review and Upbit’s Alleged Violations

Notably, Upbit is facing a disciplinary hearing to ascertain its compliance with regulatory guidelines on Know-Your-Customer (KYC) provisions. According to the FIU, the sanctions review meeting would evaluate the over 500,000 suspected KYC violations it spotted while performing on-site inspection.

This review is the first in the history of the industry in South Korea and has thus generated concerns as to the extent to which it could go. In any case, the sanction meeting would determine if Upbit did violate guidelines as observed during the virtual asset service provider (VASP) inspection.

Other key considerations include determining appropriate sanctions to mete out to Upbit and weighing Upbit’s defense for its alleged violations. The sanctions review would then decide how severe the fines and disciplinary measures should be against Upbit.

Context and Precedents to the Violations

Some allegations against Upbit include opening accounts for users with blurry customer identification. Some of the ID cards had unreadable names and blurred registration numbers. Experts maintain Upbit’s ability to defend itself could determine in which direction the case swings.

They opine that if Upbit could establish that these accounts had nothing to do with money laundering cases, the sanctions might not exist.

A similar case involving Hanbitco, the virtual asset exchange, resulted in a 2 billion won fine. 

This violated customer identification responsibilities to 197 customers. However, the Seoul Central District Court has recently overturned the sanction of 2 billion won. It decided that the presented evidence was insufficient to prove customers violated the Specific Financial Transaction Information Act.

Broader Implications and Industry Uncertainty

Interestingly, despite this pending sanctions review meeting, Upbit recently passed its license renewal deadline in October of last year. How the sanctions review committee would rule will decide the fate of Upbit in the coming days as South Korea maintains strict financial regulations.

Meanwhile, with the arrest of South Korea’s impeached president, Yoon Suk Yeol, uncertainty faces the future of cryptocurrency trade there.