Upbit, the largest cryptocurrency exchange in South Korea, is facing severe regulatory pressure due to suspected violations in financial compliance. The Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) has issued a notice to Upbit accusing it of violating Customer Identification (KYC) and Anti Money Laundering (AML) regulations. The sanctions that this exchange may face could have a significant impact on its operations and reputation.

Upbit received the relevant accusation notification last week and needs to submit a response to FIU before January 20th. The regulatory agency will make a final decision after reviewing Upbit's defense. If sanctions are confirmed, the exchange may temporarily restrict new users' asset withdrawals and may further affect its ongoing business license renewal.

Regulatory sources revealed that the investigation found significant vulnerabilities in Upbit's KYC verification program, with an estimated number of violations ranging from 500000 to 700000 transactions. The potential fine amount could reach billions of Korean won, putting pressure on Upbit's financial condition and putting its reputation to the test. In addition, Upbit has been accused of trading with unregistered overseas entities, further exacerbating regulatory pressure.

This incident is part of the comprehensive reform of cryptocurrency regulation in South Korea, aimed at strengthening supervision of exchanges. After the Terra crash in 2022, FSC increased its monitoring of digital asset platforms and introduced multiple measures to enhance consumer protection and prevent illegal activities. The "Virtual Asset User Protection Law" implemented in 2024 further strengthens the compliance requirements for cryptocurrency operators and promotes exchanges to adapt to the constantly changing regulatory environment.

Upbit, which holds over 70% of the cryptocurrency market in South Korea and has a daily trading volume of billions of dollars, is now at the center of this regulatory change. FI's actions are interpreted as the government's determination to maintain financial order and fairness in the field of digital assets. Industry insiders believe that this case may lay the foundation for stricter enforcement measures in the future,

Although the direct impact of sanctions may be limited to restricting the activities of new users, the long-term effects of their presence remain unclear. Industry observers are closely monitoring the development of this matter, as Upbit's response to these allegations may impact broader regulatory trends in the South Korean cryptocurrency industry. The final ruling of FIU is expected to be announced shortly after the submission deadline on January 20th.