As an analyst with extensive experience in the crypto industry and a particular interest in South Korea’s regulatory landscape, I find myself increasingly concerned about the latest developments surrounding Upbit. The reported KYC violations by one of the country’s largest exchanges are not only troubling but also indicative of a larger issue within the industry: compliance with regulations.
It’s said that the significant South Korean cryptocurrency exchange, Upbit, may be under suspicion for significant lapses in Know Your Customer (KYC) protocols as it seeks to renew its domestic license.
According to a report by Maeil Business Newspaper on November 14th, South Korea’s Financial Intelligence Unit (FIU), part of the Financial Services Commission (FSC), has discovered approximately 500,000 to 600,000 instances where there may have been breaches in Know Your Customer (KYC) procedures on the Upbit cryptocurrency exchange.
According to reports, during their review of Upbit’s business license renewal process, the relevant authorities allegedly found suspected issues regarding customer verifications. These issues could potentially impact the way Upbit conducts its exchange transactions.
Upbit allegedly accepted blurred IDs for KYC
In South Korea, it’s mandatory for cryptocurrency platforms or Virtual Asset Service Providers (VASPs) to implement robust Know Your Customer (KYC) guidelines.
In January 2018, the South Korean government aimed to control cryptocurrency trading by permitting trades exclusively through bank accounts linked to real identities. Following strengthened regulations, the Financial Services Commission enforced a compulsory registration procedure for all crypto exchanges, ensuring they adhered to Know Your Customer (KYC) and Anti-Money Laundering (AML) standards.
The MK report indicates that the Financial Intelligence Unit found numerous instances where Upbit allegedly failed to adhere to Know Your Customer (KYC) protocols.
For instance, It is claimed that Upbit permitted account creation using identifications featuring unclear personal details like names and registration numbers, making it difficult for regulatory bodies to clearly identify these users.
As a crypto investor, I’ve noticed some concerns about Upbit regarding alleged customer verification violations. It seems they might be facing fines of approximately 100 million Korean won ($71,500) per case, and there are potential issues with the renewal of their business license as well.
FSC previously initiated a monopoly probe against Upbit
Established in the year 2017, Upbit ranks among the biggest cryptocurrency trading platforms not just in South Korea but worldwide. It handles trades valued at approximately $2.2 billion daily, as reported by CoinGecko.
Just recently, allegations about Upbit’s know-your-customer (KYC) procedures have surfaced. This news follows reports from October when it was announced that the Financial Services Commission (FCS) would be investigating the exchange for possible violations of anti-monopoly laws.
The probe into Upbit’s market dominance stemmed from its tight association with K-Bank, an entity that has faced continuous examination by local authorities due to its significant involvement with cryptocurrency exchanges. By November 2023, regional news outlets suggested that up to 70% of K-Bank’s deposits were associated with the crypto sector.
Towards the end of October, as reported by Bloomberg, K-Bank called off their $732 million debut offering (Initial Public Offering or IPO) in Seoul due to worries about its overvaluation and reliance on a cryptocurrency company for financing. This IPO would have been the biggest public listing in South Korea since 2022.
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2024-11-15 12:17