One of South Korea's largest cryptocurrency exchanges, Upbit, is now under suspicion of serious violations in Know Your Customer (KYC) procedures when it comes to renewing its local license.
South Korea’s Financial Intelligence Unit (FIU), under the Financial Services Commission (FSC), has detected at least 500K to 600K potential KYC violations on Upbit exchange, local news outlet Maeil Business Newspaper (MK) reported on Nov. 14.
Authorities discovered suspicious violations in customer verification while reviewing Upbit's license renewal process, potentially affecting the exchange's operations.
Upbit Accused of Accepting Blurred IDs in KYC
In South Korea, cryptocurrency exchanges or virtual asset service providers (VASPs) are required to establish strict KYC procedures.
In January 2018, the South Korean government sought to regulate cryptocurrency trading by allowing trading only from real-name bank accounts. Following the increased regulation, the FSC introduced a mandatory registration process for all exchanges, to ensure compliance with KYC and Anti-Money Laundering (AML) rules.
According to MK’s report, the FIU identified multiple instances where Upbit allegedly failed to follow KYC procedures.
For instance, Upbit is accused of allowing users to open accounts with IDs whose personal data, such as names and registration numbers, are blurred, making it impossible for regulators to accurately identify them.
Due to the alleged customer verification violations, Upbit is likely to face a fine of 100 million South Korean won, or $71,500, per case, along with possible issues in renewing their business license.
FSC previously initiated an exclusive investigation into Upbit
Founded in 2017, Upbit is one of the largest cryptocurrency exchanges in South Korea and globally, with daily trading volume of up to $2.2 billion, according to data from CoinGecko.
The recent disclosure of Upbit’s alleged KYC issues comes a month after the FSC announced plans to investigate the exchange for potential antitrust violations in October.
Upbit's exclusive investigation is related to its close relationship with K-Bank, which local authorities have long suspected due to its large exposure to cryptocurrency exchanges. In November 2023, local reports said that up to 70% of K-Bank's deposits were linked to cryptocurrencies.
In mid-October, K-Bank pulled out of its $732 million initial public offering in Seoul due to concerns about its high valuation and reliance on a cryptocurrency operator for funding, according to Bloomberg. The IPO would have been South Korea’s largest public listing since 2022.
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