Major South Korean cryptocurrency exchange Upbit is reportedly suspected of massive breaches in Know Your Customer (KYC) procedures amid its local license renewal.
South Korea’s Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) has identified at least 500,000 to 600,000 potential KYC violations by the Upbit exchange, local news agency Maeil Business Newspaper (MK) reported on Nov. 14.
The authority reportedly spotted alleged customer verification breaches while reviewing the renewal of Upbit’s business license, potentially affecting the exchange’s operations.
Upbit allegedly accepted blurred IDs for KYC
In South Korea, cryptocurrency exchanges or virtual asset service providers (VASPs) are obligated to establish strict KYC procedures.
In January 2018, the South Korean government sought to regulate crypto trading by allowing such trading only from real-name bank accounts. After beefing up the regulations, the FSC introduced a mandatory registration process for all crypto exchanges, ensuring they comply with KYC and Anti-Money Laundering (AML) protocols.
According to the MK report, the FIU identified many cases where Upbit reportedly did not follow KYC procedures.
For example, Upbit allegedly allowed users to open accounts using IDs with blurred personal data such as names and registration numbers, which didn’t allow regulators to properly identify them.
Due to the alleged customer verification violations, Upbit reportedly faces fines of 100 million Korean won ($71,500) per case, in addition to possible issues with Upbit’s business license renewal.
FSC previously initiated a monopoly probe against Upbit
Founded in 2017, Upbit is one of the largest crypto exchanges in South Korea and globally, trading $2.2 billion daily, according to CoinGecko.
The disclosure of Upbit’s alleged KYC issues comes a month after the FCS reportedly announced plans in October to investigate the exchange for potential anti-monopoly breaches.
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Upbit’s monopoly investigation was related to its close relationship with K-Bank, which local authorities have long scrutinized due to its high exposure to crypto exchanges. In November 2023, local reports indicated that as much as 70% of K-Bank’s deposits were linked to crypto.
In mid-October, according to Bloomberg, K-Bank withdrew its $732 million initial public offering (IPO) in Seoul amid concerns over high valuation and dependency on a cryptocurrency operator for its funding. The IPO would’ve been South Korea’s largest public listing since 2022.
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