South Korea’s FIU Investigates Upbit Over 600,000 KYC Violations Amid License Renewal

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South Korea’s Financial Intelligence Unit (FIU) is reportedly investigating Upbit, one of the country’s leading cryptocurrency exchanges, over a staggering 600,000 alleged Know Your Customer (KYC) violations. The probe arises as the exchange seeks to renew its business license, with potential implications for its operations.

Monopoly Concerns and Regulatory Scrutiny

As per local news reports, Upbit is under investigation for allegedly accepting blurred ID submissions that didn’t meet South Korea’s strict KYC standards. Since late August, South Korea’s Financial Intelligence Unit (FIU) has been inspecting Upbit’s license renewal applications. During this review, they found at least 500,000 instances where KYC procedures were not properly followed. KYC, which verifies customer identities, is crucial for preventing money laundering and terrorism financing. Crypto exchanges require users to open real-name accounts and complete KYC before trading or withdrawing funds to comply with anti-money laundering regulations. 

This probe follows concerns about Upbit’s market dominance. The Financial Services Commission (FSC) recently started an anti-monopoly investigation into its relationship with K-Bank. Reports suggest 70% of K-Bank’s deposits are linked to crypto, raising concerns over the bank’s reliance on Upbit. As a result, K-Bank recently pulled its $732 million IPO, which was set to be South Korea’s largest since 2022.

Crypto Impact

Notably, Upbit, holding a whooping 70% market share in South Korea’s cryptocurrency exchange sector, earns significant revenue through its fee structure. For transactions in the South Korean won market, it charges 0.05% of the transaction value for regular orders and 0.139% for pre-orders.

These fees underscore its dominant position in the domestic market, further highlighting its role in shaping the country’s crypto trading landscape. As Upbit trades $2.2 billion daily, the outcome of these investigations could have significant repercussions for South Korea’s crypto market. 

Will South Korea’s crypto scrutiny backfire the country financially?