Major South Korean cryptocurrency exchange Upbit is under scrutiny for alleged significant breaches of Know Your Customer (KYC) regulations as it seeks to renew its local license.
The Financial Intelligence Unit (FIU) of South Korea’s Financial Services Commission (FSC) reportedly uncovered 500,000 to 600,000 potential KYC violations during its review, according to a Nov. 14 report by Maeil Business Newspaper (MK).
These findings could potentially impact Upbit’s operations and its ability to renew its business license.
Upbit Allegedly Accepted Blurred IDs for KYC
Cryptocurrency exchanges in South Korea are legally required to maintain strict KYC and Anti-Money Laundering (AML) procedures.
Since January 2018, the government has mandated real-name bank accounts for crypto trading, and all Virtual Asset Service Providers (VASPs) must register with the FSC.
The MK report claims that Upbit failed to meet these standards, allowing users to create accounts using IDs with blurred personal information, such as names and registration numbers, making proper verification difficult.
Upbit could face fines of up to 100 million Korean won ($71,500) per violation, in addition to challenges with its license renewal.
Monopoly Investigation and K-Bank Concerns
Founded in 2017, Upbit is one of South Korea’s largest crypto exchanges, with $2.2 billion in daily trading volume, per CoinGecko.
This KYC controversy follows an anti-monopoly investigation launched by the FSC in October 2023, linked to Upbit’s relationship with K-Bank.
Authorities have long scrutinized K-Bank due to its heavy reliance on crypto exchanges, with reports indicating that 70% of its deposits are tied to cryptocurrency.
In October, K-Bank canceled its $732 million initial public offering (IPO), citing valuation concerns and its dependency on crypto-related funding.
Broader Regulatory Challenges
Upbit’s alleged KYC violations highlight ongoing regulatory challenges in South Korea’s crypto market, particularly as authorities tighten oversight of digital asset platforms.