Upbit has been accused of serious violations of Know Your Customer (KYC) procedures.

South Korea’s Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) reports that the exchange has committed 500,000 to 600,000 potential KYC violations. This could jeopardize Upbit’s business license renewal and future operations.

Since its founding in 2017, Upbit has become a major player among cryptocurrency exchanges in South Korea and around the world. According to CoinGecko, daily trading volume can reach up to $2.2 billion.

However, Upbit’s violations of KYC procedures not only tarnish the exchange’s reputation, but also potentially lead to fines and business license renewal issues.

South Korea took important steps to regulate cryptocurrency trading in 2018. The government allowed cryptocurrency trading only with real-name bank accounts.

The Financial Services Commission (FSC) then mandated all crypto exchanges to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols. Exchanges that do not comply with these regulations are expected to face serious sanctions.

However, Upbit’s KYC violations are being seriously scrutinized by local authorities. Authorities may have allowed the exchange to bypass the identity verification process by hiding users’ personal information.

For example, Upbit allegedly allowed some of its users to open accounts with identities whose personal information had been blurred. This prevents regulators from accurately identifying users, which leads to violations being detected.

Although Upbit has maintained in response to these allegations that it did not violate KYC procedures, violations detected by the FIU could result in the exchange paying a fine of up to 100 million Korean Won (approximately $71,500).

Additionally, Upbit is likely to encounter problems in the renewal process of its local business license. Authorities are carefully evaluating whether the exchange complies with KYC regulations and may make a decision that could impact its future operations.

This could complicate Upbit’s relations not only with local regulators, but also with international regulators. In this period when cryptocurrency exchanges are facing increasing inspections and regulations around the world, Upbit’s responsibility to comply with these regulations has become increasingly critical.

This incident is also linked to Upbit’s monopoly situation. Last October, it was brought to the fore that the FSC launched an investigation to examine Upbit’s close relations with K-Bank.

This relationship has long been considered a risk factor in the eyes of local authorities due to K-Bank’s high exposure to cryptocurrency exchanges. K-Bank’s high dependence on the cryptocurrency industry increases the South Korean government’s pressure on crypto regulations.

Upbit’s KYC violations threaten the future of the exchange and the South Korean cryptocurrency market in general. This once again reveals that exchanges need to make more efforts to ensure customer safety by complying with regulators.