NewsUpbit Faces South Korea Ban Over Crypto AML and KYC Violations
Nidhi Kolhapur16 Jan 20255 min read
South Korea’s financial regulators have taken a significant step by notifying upbit upbit Upbit is a South Korean cryptocurrency exchange launched in 2017 by fintech firm Dunamu, in partnership with Bittrex. Founded by Song Chi-hyung, the platform is known for its high liquidity, strong security, wide range of digital assets, and deep regional adoption, especially in Korean Won (KRW). Upbit is designed for both beginners and professional traders with a strong focus on safety and compliance. Key Features of Upbit: Users can trade multiple cryptocurrencies, including Bitcoin, Ethereum, and many others. Enables users to stake certain coins and earn passive revenue from staking or yield farming. Order books, market data, and historical analytics to help users make informed trading decisions. Offers strong security features like 2FA and safe wallet storage. Upbit Milestones Year Key Achievements 2017 Launched in October by Dunamu in partnership with Bittrex, listing over 110+ altcoins. Within two months, it became the world’s #1 exchange by 24-hour volume. 2018 Hosted the first Upbit Developer Conference (UDC). In December, became the first to receive Korea Internet & Security Agency (KISA) ISMS certification, alongside ISO 27001, 27017, and 27018. 2019 A hot wallet breach occurred in November, involving 342,000 ETH (approx. $58M at the time). Upbit covered 100% of user losses using company funds. 2020 Shifted to a “High-Trust” model, launched the Upbit Care Center, and strictly implemented Travel Rule compliance. 2021 Became the first exchange to register as a VASP with Korea’s FIU and launched Upbit NFT with HYBE (BTS) and JYP Entertainment. 2022-2023 Rolled out Staking 2.0 for ETH and SOL, introduced an independent login system, blocked 100,000+ hack attempts, and received ISO 22301 certification. 2024-2025 Stayed among the top global exchanges for XRP and SOL trading volume. During a $36M Solana exploit, Upbit quickly froze assets, fully reimbursed users, and moved 95% of funds to multi-signature cold storage. Upbit 2026 Updates GoChain (GO) Investment WarningUpbit issued an Investment Warning for GoChain (GO) due to declining development activity and network usage. The exchange added stricter disclosures and trading limits to protect retail investors. iExec (RLC) Supply ExpansionUpbit approved a 7.4% circulating supply increase for iExec (RLC), adding 6M tokens after a request from the project team to improve liquidity and ecosystem growth. FLOW Delisting AnnouncementUpbit announced the delisting of FLOW/KRW and FLOW/BTC pairs, effective March 16, 2026, due to security issues. This led to a legal challenge from the Flow Foundation against Upbit and the DAXA alliance. Definitive (EDGE) Strategic ListingUpbit listed Definitive (EDGE) with KRW, BTC, and USDT trading pairs. The project focuses on verifiable data integrity, a sector gaining attention under Korea’s regulatory climate. XRP Trading Volume SurgeHeatmap data showed Upbit becoming the #1 global exchange for XRP trading volume, overtaking Binance and Coinbase, driven by strong demand from Korean traders. FSC Equity Cap ResponseAfter the Financial Services Commission (FSC) proposed a 20% ownership cap, Chairman Song Chi-hyung (holding ~25.5%) will reduce equity during a three-year grace period as Upbit restructures into a public utility-style entity. [email protected] Event OrganiserCentralised ExchangeFinancial Service Provider , the country’s largest virtual asset exchange, of a possible suspension of its business operations. The move comes amid allegations that the platform failed to meet anti-money laundering (AML) standards and violated customer identification (KYC) requirements.
This decision could have a major impact on the domestic crypto market.
Sanctions and Allegations: The Key Issues
The Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) issued a preliminary notice of sanctions to Upbit on January 9. The charges involve breaches of the Specific Financial Transaction Information Act, which enforces strict AML and KYC compliance.
If the sanctions are imposed, Upbit will be prohibited from onboarding new customers for up to six months. During this period, new users will also be restricted from transferring virtual assets outside the platform.
However, existing users will still be able to trade, allowing the platform to continue some operations. Given that Upbit handles over 70% of South Korea’s crypto trading volume, the potential consequences are considerable.
Next Steps: Upbit’s Response and the FIU Hearing
Upbit has until January 20 to provide a formal response to the sanctions. The FIU will then hold a hearing on January 21 to finalize its decision, including the length of the suspension. This gives the exchange a short window to defend its practices and potentially reduce the severity of the penalties.
Broader Impact on the Crypto Industry
These sanctions come on the heels of South Korea’s Virtual Asset User Protection Act, introduced in July, which emphasizes curbing illegal and unethical practices in the virtual asset industry. The strict action against Upbit has sparked concern among other exchanges, highlighting the increasing regulatory pressure in the sector.
The sanctions may also affect Upbit’s ability to renew its business license. Although the exchange’s license was renewed in October 2023, the ongoing regulatory review and these allegations could create challenges for its future compliance status.
Violations Uncovered During the Investigation
The FIU’s investigation uncovered approximately 700,000 cases where Upbit failed to properly implement KYC procedures. Additionally, the exchange was accused of conducting transactions with unregistered overseas virtual operators. These violations could result in hefty fines, as the Special Financial Transactions Act allows penalties of up to 100 million won per infraction.
An Upbit spokesperson acknowledged the difficulty of identifying unregistered overseas exchanges on the blockchain but noted that efforts are underway to address these compliance issues.
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The outcome of the January 21 hearing will likely set an important precedent for how South Korea’s authorities approach similar cases in the future.
