In a significant development for the South Korean cryptocurrency landscape, a local court has lifted the partial business suspension imposed on Upbit, the nation’s largest crypto exchange. This decision permits the platform to once again service new clients while the legal dispute continues, highlighting the ongoing tensions between financial regulators and cryptocurrency businesses.
On February 25, the South Korean Financial Intelligence Unit (FIU) sanctioned Upbit with a three-month ban on deposits and withdrawals for new clients. This action stemmed from alleged violations of regulations concerning transactions with unregistered virtual asset service providers (VASPs). In response to the sanction, Upbit’s parent company, Dunamu, swiftly responded by filing a lawsuit against the FIU, seeking to overturn the suspension order and subsequently requesting a temporary injunction.
The court’s recent decision to grant the injunction, allowing Upbit to resume operations for new clients, comes as a relief amidst ongoing legal proceedings. As reported by local media, the suspension order will be held in abeyance for 30 days following the court’s judgment. This development has reignited discussions around the regulatory framework governing cryptocurrency exchanges in South Korea.
Background of Upbit’s Regulatory Challenges
Established in 2017, Upbit has rapidly ascended to prominence in South Korea’s crypto arena. The FIU’s investigation, which began on October 10, has unveiled various compliance issues, including potential breaches of the country’s anti-monopoly laws and Know Your Customer (KYC) regulations. As noted by the FIU, Upbit may be implicated in approximately 500,000 to 600,000 KYC violations, primarily surfaced during the review of the exchange’s business license renewal.
The South Korean government has been keen on tightening the screws on cryptocurrency trading, having ended anonymous trading for citizens back in 2018. The current stringent measures aim to ensure compliance and bolster accountability within the crypto trading ecosystem. Allegations against Upbit extend beyond KYC issues, as the FIU has accused the exchange of facilitating 45,000 transactions with unregistered foreign exchanges, which stands in violation of the Act on Reporting and Using Specified Financial Transaction Information.
Stricter Oversight on Cross-Border Transactions
As the country grapples with these regulatory challenges, South Korea is also stepping up its oversight of cross-border crypto asset transactions. On October 25, 2024, Finance Minister Choi Sang-Mok announced plans to introduce new mandates requiring reporting from businesses engaged in such transactions. This initiative aims to establish preemptive monitoring mechanisms to address potential tax evasion and currency manipulation concerns within the crypto framework.
In conjunction with these regulations, South Korea’s recent actions have included blocking applications of 17 unregistered crypto exchanges on Google Play at the request of the FIU. The government is actively seeking to limit exchange access via internet platforms and app stores as part of its larger regulatory strategy.
With Upbit’s temporary reinstatement for new clients, the ongoing legal and regulatory battles will continue to shape the future of cryptocurrency trading in South Korea. Stakeholders across the industry will be keenly observing how these developments unfold and react to the complex interplay of compliance, innovation, and market dynamics.
