Nikolas Sargeant
Upbit, South Korea's largest cryptocurrency exchange, is facing a partial business suspension after the Financial Intelligence Unit (FIU) imposed a three-month ban on new customer deposits and withdrawals. The sanctions, announced on February 25, come in response to Upbit's failure to comply with South Korean policies on Know Your Customer (KYC) regulations. Upbit has admitted to breaching these policies and has since reviewed and implemented corrective measures to address the FIU’s concerns, though the company hinted that the scope of the sanctions might be adjusted as per further regulatory proceedings.
The timing of the sanctions couldn't be more critical for Upbit, which has already seen a sharp decline in trading volumes. Since January, the exchange’s daily volumes have plummeted by 70%, now totaling $4.6 billion. This drop coincides with the FIU's January notification of potential punitive measures related to earlier KYC violations, which had affected up to 600,000 clients. While existing customers remain unaffected by the ban, the loss of new business during a period of regulatory tension could exacerbate Upbit’s struggles in maintaining market dominance.
Upbit’s business troubles are compounded by a series of other recent challenges. In December 2024, the exchange, along with rival Bithumb, agreed to pay $2.4 million in compensation after service outages during South Korea's martial law crisis disrupted trading. Adding to the pressure, the Financial Services Commission (FSC) is also investigating Upbit for its market dominance, further intensifying the scrutiny the exchange is facing. While the company has apologized to users for the inconvenience, the regulatory environment is becoming increasingly hostile.
Despite these challenges, Upbit remains a key player in the global crypto market, ranking 23rd by trust score according to CoinGecko. As the exchange awaits the results of its ongoing negotiations with South Korean authorities, many will be watching closely to see how the situation develops and whether the sanctions will indeed be lifted or modified in the coming months.
