South Korea Intensifies Scrutiny on Upbit Over KYC and Anti-Monopoly Violations

Upbit, South Korea's largest cryptocurrency exchange, has found itself at the center of an ongoing regulatory storm. Founded in 2017, the exchange has faced multiple investigations by South Korean authorities in recent years, with the latest focus on potential breaches of the country’s anti-monopoly laws and Know Your Customer (KYC) regulations.

Investigation for Anti-Monopoly Breaches

On October 10, the Financial Services Commission (FSC) launched a formal investigation into Upbit. The inquiry is focused on possible violations of South Korea's anti-monopoly laws, which could have far-reaching consequences for the platform. This investigation comes amidst growing concerns about the concentration of market power in the hands of a few major players in the crypto exchange space.

KYC Violations: A Major Concern for Regulators

The investigation into Upbit's operations also revealed alarming findings related to KYC violations. On November 15, the Financial Intelligence Unit (FIU) flagged up to 600,000 potential KYC violations involving Upbit. The issue was brought to light during the regulator’s review of the exchange’s business license renewal. Since 2018, South Korea has required crypto exchanges to conduct KYC checks, preventing anonymous trading. As part of this regulatory shift, users must now provide verification before trading digital assets on exchanges like Upbit.

Violations of Financial Regulations

In addition to concerns over KYC non-compliance, the FIU accused Upbit of facilitating 45,000 transactions with unregistered foreign crypto exchanges, which violates the Act on Reporting and Using Specified Financial Transaction Information. This development has raised alarm among regulators about the role of exchanges in enabling potentially illicit cross-border financial activities.

South Korea’s Crackdown on Overseas Crypto Exchanges

This recent crackdown is part of a broader trend in South Korea aimed at tightening control over the crypto market. On October 25, 2024, South Korea announced that it would strengthen oversight of cross-border crypto asset transactions. Finance Minister Choi Sang-Mok emphasized that the government’s primary objective is to prevent the use of digital assets for tax evasion and currency manipulation.

As part of this new initiative, South Korea's Google Play store blocked the apps of 17 crypto exchanges at the request of the FIU. Additionally, the FIU has been working to restrict exchange access through Apple’s App Store and other online channels.

Regulatory Impact and Global Implications

The increasing regulatory pressure on Upbit and other exchanges signals South Korea’s determination to create a more transparent and accountable environment in the crypto space. These actions also highlight the growing global trend of increased scrutiny on crypto platforms, particularly when it comes to cross-border transactions and adherence to regulatory frameworks.

While Upbit has yet to fully respond to the allegations, the exchange is now facing not only the potential legal repercussions of these investigations but also the challenge of maintaining its position as South Korea’s leading exchange amidst heightened regulatory risks.

What’s Next for Upbit?

As the legal and regulatory battle continues, Upbit’s operations will likely undergo further scrutiny. The outcome of this investigation could have significant implications for both the exchange and the broader South Korean crypto landscape. For now, users and investors are closely monitoring how these developments will unfold.

Stay Updated on Regulatory Changes in South Korea’s Crypto Space

For more information on the ongoing investigation into Upbit and the broader regulatory landscape, follow the latest updates on FIU’s Official Website and Upbit’s Official Announcement.