South Korea's Largest Crypto Exchange Under Scrutiny for KYC Violations

Upbit, South Korea's largest cryptocurrency exchange, has come under scrutiny for allegedly failing to comply with customer identity verification (KYC) requirements. The South Korean Financial Intelligence Unit (FIU) discovered between 500,000 and 600,000 KYC violations during the exchange's license renewal process. These violations include the opening of accounts using blurry identification documents and insufficient verification processes.

Non-compliance with the regulations established under the Act on Reporting and Using Specified Financial Transaction Information could expose Upbit to significant financial penalties. If the violations are confirmed, the exchange could face fines of up to 100 million won (approximately $74,000) for each infraction. These violations are expected to prolong Upbit's license renewal process, which occurs every three years.

Delays in the license renewal process are anticipated. Non-compliance with KYC rules appears likely to substantially extend the timeframe needed for Upbit to renew its business license. Such regulatory scrutiny could jeopardize the exchange's dominance in the South Korean crypto market. Financial Services Commission (FSC) Chairman Kim Byung-hwan has previously indicated that an investigation into the monopolistic structures of cryptocurrency exchanges should be conducted.

Last month, the exchange recorded a trading volume of $7.7 billion daily, with a total of over $48.2 billion in October. Upbit representatives declined to comment on the FIU's findings, citing legal confidentiality obligations.

Recently, Upbit moved customer data to Amazon Web Services (AWS) servers based in the United States to strengthen its operational infrastructure. This step reflects efforts to ensure regulatory compliance and privacy requirements while reducing the risks of system failures and cyberattacks.