South Korea’s largest cryptocurrency exchange, Upbit, operated by Dunamu, is facing a significant regulatory crackdown due to multiple violations related to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. The Financial Intelligence Unit (FIU), operating under the Financial Services Commission (FSC) of South Korea, has imposed a partial business suspension on Upbit, marking a critical enforcement action in the country’s increasingly stringent regulatory environment for virtual asset service providers.
Background and Regulatory Context
Upbit, established in 2017, holds a dominant position in South Korea’s crypto market with around 70% market share. It is also one of the top cryptocurrency exchanges globally by trading volume. Despite its market leadership, Upbit has come under intense scrutiny for allegedly failing to comply with crucial regulatory obligations aimed at preventing money laundering and illegal fund flows within the cryptocurrency ecosystem.
The regulatory issues began surfacing following on-site inspections conducted by the FIU between August and October 2024 after Upbit submitted its business license renewal application. The FIU’s investigations uncovered numerous compliance failures, leading to escalating enforcement measures in early 2025.
Violations and Findings
The FIU found that Upbit had numerous violations related to customer identification and transaction monitoring:
- An estimated 700,000 cases of KYC violations, including 34,777 instances where identification documents were blurry or incomplete, and 5,785 cases of incorrect or missing customer address information.
- Engagement in crypto asset transfers with 19 unregistered foreign virtual asset service providers, totaling nearly 44,948 suspicious transactions.
- Failure to meet AML requirements by facilitating transactions that violated the Act on Reporting and Using Specific Financial Transaction Information.
The investigation also revealed that Upbit’s services to overseas traders conflicted with South Korean regulations, which restrict domestic crypto exchanges to transactions verified with South Korean citizens only.
Enforcement Actions
In response to these findings, the FIU ordered a three-month partial business suspension effective from March 7 to June 6, 2025. While existing customers can continue trading and make deposits or withdrawals without restrictions, new customers are barred from transferring crypto assets to others during this suspension period. This means new users cannot deposit or withdraw cryptocurrency to external wallets while the suspension is in place.
Additionally, Dunamu, Upbit’s operator, was subjected to personnel sanctions. Nine compliance-related employees, including the compliance officer, were disciplined, and CEO Lee Sirgoo received a formal reprimand for oversight failures.
The FIU indicated that the sanctions could be subject to changes depending on further regulatory discussions and Upbit’s compliance improvements. It also pointed out that financial penalties and further disciplinary actions might follow after deliberations at its disciplinary committee.
Upbit’s Response and Appeal
Upbit publicly acknowledged the violations and expressed regret over the disruptions caused to users. In a statement, the exchange affirmed its commitment to correcting the issues and enhancing compliance with AML and KYC regulations. Upbit described the sanctions as severe and announced plans to appeal the FIU’s decision, arguing that it has already made significant improvements to its compliance systems.
The exchange reassured customers that once regulatory restrictions are lifted, new users will regain full access to transfer and withdrawal functionalities. Upbit also emphasized its intention to closely monitor transactions to prevent future violations.
Market and Regulatory Implications
The enforcement action against Upbit underscores South Korea’s firm stance on regulating the cryptocurrency sector. The government aims to create a transparent and secure environment amid increasing global concerns about money laundering and fraud risks associated with virtual assets.
Moreover, South Korea’s strict crypto regulatory framework includes severe penalties for non-compliance. Upbit reportedly faces potential fines reaching up to 183 trillion won (approximately $131.5 billion) over nearly 9.57 million violations spanning multiple regulatory categories. While the current suspension specifically targets new customer transactions, the broader financial and reputational risks for Upbit are substantial.
The South Korean government has also launched an antitrust investigation into Upbit, focusing on allegations of monopolistic behavior in the domestic crypto market. This dual regulatory pressure reflects a comprehensive approach to ensuring fair competition and robust compliance within the industry.
Broader Context of AML Compliance in Crypto
Upbit’s case is part of a wider global trend where cryptocurrency exchanges are held accountable for stringent AML and KYC standards. Authorities increasingly expect virtual asset businesses to prevent illicit finance and fully verify user identities, consistent with international standards.
South Korea’s experience serves as a reminder for exchanges worldwide about the critical importance of maintaining effective risk management, transaction monitoring, and cooperation with regulators.
AML Editor’s article was originally published in coinmarketcap on Augurt, 14, 2025