South Korea's FIU Imposes Partial Suspension on Upbit Crypto Exchange

South Korea's FIU Partially Suspends Upbit Crypto Exchange

South Korea's Financial Intelligence Unit (FIU) has imposed a three-month partial business suspension on Upbit, a major cryptocurrency exchange, effective immediately. This restriction prohibits new customers from making crypto deposits and withdrawals, stemming from non-compliance with local regulations that bar exchanges from interacting with unregistered crypto asset service providers (CASPs).

Background and Response

Upbit acknowledged the FIU's findings from on-site inspections conducted in 2024, which led to the sanctions. The exchange has apologized for the inconvenience caused to its customers and has reportedly implemented necessary improvements as directed by the financial authority. Upbit noted that the scope of the sanctions may be adjusted based on "specific facts and circumstances" yet to be considered, leaving room for potential changes through regulatory procedures.

Impact on Trading and Existing Customers

While existing Upbit customers remain unaffected and can continue using all services, the exchange has experienced a significant decline in trading volumes. Since January, daily trading volumes have dropped by approximately 70%, currently standing at $4.6 billion.

Company Background and Regulatory Issues

Upbit, established in 2017, is South Korea's largest centralized cryptocurrency exchange and ranks 23rd globally by trust score, according to CoinGecko. This recent sanction follows earlier reports of potential punitive measures related to alleged Know Your Customer (KYC) violations, with up to 600,000 breaches identified by the FIU in its client identification procedures as of November 2024.