South Korea’s Financial Intelligence Unit (FIU) has imposed a three-month suspension on new customer transactions at cryptocurrency exchange Upbit, starting from March 7 to June 6.
The suspension prohibits Upbit from facilitating crypto deposits and withdrawals for new customers during the designated period.
According to a recent FIU notice, the measure is in response to the exchange’s violations of policies against transactions with unregistered crypto asset service providers (CASP).
Tighter Enforcement
Upbit confirmed the temporary restriction on cryptocurrency deposits and withdrawals for newly registered users. In a notice published on Feb. 25, the exchange expressed sincere apologies to its users for any inconvenience caused.
The sanction will not affect existing customers, according to Upbit. Under the FIU’s directives, all trading, buying, selling, and Korean Won (KRW) deposit and withdrawal services remain fully operational for existing Upbit users.
New users can still engage in cryptocurrency trading and KRW transactions on the Upbit platform. However, crypto transfers and withdrawals are temporarily restricted.
Upbit asserted in the notice that the temporary restrictions on new customer crypto transfers do not impact the core trading functionalities of the exchange. The company remains focused on enhancing its internal controls and compliance framework to meet the highest industry standards.
Upbit stated it has already taken major steps to address the FIU’s identified areas for improvement.
While Upbit has implemented corrective measures, the exchange intends to engage in constructive dialogue with the FIU regarding certain aspects of the sanctions, specifically the level of them, and some reasoning behind them, with the goal of accurate clarification.
Upbit also reaffirmed its commitment to adhering to stringent regulatory standards and prioritizing AML compliance. The company added that it fully understands the importance of establishing a secure and transparent digital asset ecosystem.
Upbit will provide timely updates to its users regarding any changes to the current restrictions. Should the FIU’s directives be modified, new customers will regain full access to all Upbit services.
Violations Uncovered
Reports from local outlets last month revealed the FIU’s preliminary notice of sanctions for Upbit. These reports suggested the exchange could face a six-month ban on new customer registrations, while existing users would retain full trading access.
This warning came after on-site inspections conducted in 2024 revealed that Upbit facilitated 44,948 transactions with 19 unregistered overseas virtual asset service providers. FIU also accused the exchange of violating customer identification obligations in 34,777 cases.
Upbit reportedly might face a penalty up to billions of won, with each violation carrying a penalty of up to 100 million won (approximately $68,600). However, there was no information about the charges in the FIU’s notice.
Apart from the sanction, disciplinary actions have been taken against Upbit’s executives, including a reprimand warning for CEO Lee Seok-woo and dismissal of the compliance officer.
South Korea’s regulators have adopted a cautious approach to cryptocurrency. FIU’s action signals strict enforcement of South Korea’s Virtual Asset User Protection Act, implemented in July 2024, and could impact other crypto exchanges in the country.
However, Korean regulators are also willing to accommodate certain use cases and facilitate institutional involvement.
According to an earlier report, the Financial Services Commission (FSC) will allow charities and universities to sell donated cryptocurrency in the second quarter of this year to meet the demands for institutional crypto trading.
The decision is part of a regulatory shift as the FSC prepares a guideline for crypto exchanges to sell assets for operational costs, ensuring no conflicts of interest with users.
Seo Yoo-seok, South Korea’s top financial leader, has advocated for the approval of cryptocurrency spot exchange-traded funds (ETFs) and the formal recognition of security tokens in South Korea. He believes that crypto ETFs would enhance market transparency, increase institutional participation, and affirm the nation’s position in digital asset leadership.
Yoo-seok has urged the government to act rapidly to maintain the nation’s competitive stance in the global crypto market.
