30s Summary

South Korean cryptocurrency exchange Upbit is being scrutinised by the Financial Intelligence Unit (FIU) for possible violations of customer identification rules during the renewal of its local licence. The FIU has identified between 500,000 and 600,000 potential instances where rules were not adhered to. In 2018, the government imposed stricter regulations requiring crypto exchanges to keep thorough customer identification records and only allowing trades from verified bank accounts. Upbit could face a fine of $71,500 per case and hurdles in renewing its business licence. This follows a previous investigation into Upbit over suspected market domination.

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Upbit, one of South Korea’s major cryptocurrency exchanges, is under fire for allegedly having some big slip-ups with its customer identification process while trying to renew its local license.

The South Korean finance government watchdog, the Financial Intelligence Unit (FIU), thinks they’ve found between 500,000 and 600,000 possible cases where Upbit didn’t stick to the rules. They caught this during the process of reviewing the renewal of Upbit’s business license.

Cryptocurrency marketplaces like Upbit in South Korea are required to keep really thorough customer identification records. These rules got even stricter in 2018 when the government only allowed people to trade cryptocurrencies from bank accounts that were verified with their real names. After these rules were put in place, the government started making every crypto marketplace sign up for a mandatory process that ensured they were following these stricter rules.

According to some local news, the FIU found a lot of times where Upbit didn’t seem to be sticking to these customer identification rules correctly. It seems that Upbit let people make accounts using IDs where the personal information like names was blurry or hard to read. This means that it was potentially hard for the supervising bodies to tell who was who.

Upbit might have to pay a fine of about $71,500 for each case (in Korean Won, that would be 100 million per case). These slip-ups could also create a problem for renewing their business license.

The report about these identification issues follows a previous investigation by the South Korean government into whether Upbit was unfairly dominating the market. As a bit of background, Upbit was founded in 2017 and trades about $2.2 billion every day, making it one of the biggest crypto marketplaces in the world.

This previous investigation focused on Upbit’s close relationship with a local bank, K-Bank. This relationship has been in the spotlight because a large part of K-Bank’s deposits were linked to cryptocurrency. In October, K-Bank pulled out of a $732 million public offering in Seoul because it was worried about problems related to being connected to cryptocurrency for funding.