South Korea’s largest crypto exchange, Upbit, has reportedly received a suspension notice from the Financial Services Commission (FSC) for allegedly violating anti-money laundering (AML) and Know-your-client (KYC) requirements.
Upbit Faces Suspension Of Up To six Months
On Thursday, the Maeil Business Newspaper reported that South Korea’s Financial Intelligence Unit (FIU) notified the crypto exchange Upbit of possible sanctions over alleged violations of the Financial Transaction Information Act.
In line with the report, Upbit failed “to meet its anti-money laundering obligations, including violating the KYC system,” which could end in a business suspension of as much as six months.
The measure would restrict Upbit from registering recent users while the suspension lasts. Nevertheless, existing customers wouldn’t be affected. “The sanction is designed to limit recent customers from transferring cryptocurrency outside of the exchange for a certain period,” the exchange explained in an announcement cited by the report.
Upbit has until January 20 to submit an appeal to the FIU, because the regulatory agency will hold a hearing the next day to finalize the choice and establish the penalty’s duration.
The Maeil Business also noted that the sanctions on Upbit could “cause other crypto exchanges to reel” because it could possibly be “interpreted as a mirrored image of the financial authorities’ will to correct the illegal and unfair market order that has been identified as an issue within the virtual asset industry for the reason that enforcement of the Virtual Asset User Protection Act in July last 12 months.”
The country is entering the second phase of South Korea’s recent crypto investor protection laws. Phase one focused on safeguarding customer deposits and tackling unfair trading practices. Meanwhile, the second phase will give attention to closing regulatory gaps related to crypto asset issuance and distribution.
South Korea’s Crypto Industry Awaiting The Sanctions
The crypto industry is reportedly all for how the sanctions could affect Upbit’s business license renewal. Under the Special Money Act, virtual asset service providers (VASPs) must renew their licenses every three years.
Upbit’s license renewal process, which began in August, raised questions among the many financial community about its prolonged timeline. In line with previous reports, authorities’ extensive investigation has affected the license renewal, which expired in October.
While reviewing the exchange’s license renewal, the FIU found large-scale cases suspected of violating customer identification procedures. The financial authority identified around 600,000 cases where the KYC process was not properly followed.
The crypto exchange allegedly opened 1000’s of accounts without proper verification, failing to comply with anti-money laundering and Combating the Financing of Terrorism (CFT) requirements.
In line with the reports, Upbit could face fines of as much as 100 million won per case, value around $68,000, which could cost $40 billion if all 600,000 cases were confirmed and fined.
Furthermore, the report shared that the FIU allegedly imposed sanctions after determining the crypto exchange offered its service to unverified businesses overseas. South Korean regulations stipulate that local exchanges can only conduct transactions with registered service providers.
Total crypto market capitalization is at $3.43 trillion within the one-week chart. Source: TOTAL on TradingView
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