South Korea’s largest exchange Upbit faces a $131 billion fine

What’s new? Min Byung-deok, a member of South Korea’s ruling Democratic Party, has said that the country’s largest centralized crypto exchange (CEX) Upbit faces a fine of up to 183 trillion Korean won, which is about $131,5 billion at the current exchange rate. Thus, the Financial Intelligence Agency checked Dunamu, the company operator of the exchange, and found about 9,6 million cases of violation of laws.

Material by Kuki News

What else is known? Financial Intelligence has already partially suspended Upbit for three months and fired or disciplined one executive and nine employees of the exchange. That said, no fines have yet been imposed on Upbit.

Min Byung-deok clarified that Upbit committed 9,34 million violations in conducting customer identification procedures (KYC), while confirming identity is a “basic legal” standard of a virtual asset exchange.

The maximum fine for violating the Special Financial Information Act is 100 million won, or $71 800. Min explained that if the fines were applied to multiple violations by Upbit, they could total 183 trillion won.

He also pointed out the exchange’s negligence regarding AML regulations despite its leading role in the local market.

“The fact that Upbit, which can be considered a domestic monopoly, has committed 9 million violations in just one year since the Virtual Asset User Protection Act came into effect can be seen as a lack of internal control standards and a spirit of law-abidingness, as well as negligence or inaction on the part of the supervisory authority.”

According to analyst Colin Wu, spot trading volume on Upbit totaled $46,1 billion in June, down 38,5% for the month. Site traffic fell 20% to 5,8 million, with the bulk of traffic coming from South Korea (97%), the US (0,6%), and Russia (0.3%).

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The Virtual Asset User Protection Act came into effect on July 19, 2024. It aims to combat fraud, market manipulation, and insider trading and provides for penalties up to life imprisonment.

It requires exchanges to keep at least 80% of users’ crypto deposits in cold storage separate from their own funds. They must also transfer the custody of users’ cash to a licensed local bank and maintain crypto reserves equal in size and type to customer deposits.

Crypto services are also required to take out insurance or create a reserve fund to prepare for possible hacker attacks or liquidity crises.

At the same time as the law came into force, the Financial Services Commission (FSC) launched its own monitoring system to detect fraud in the crypto market.

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Last October, Korea’s crypto exchanges were required to report crypto transaction data to tax and financial regulators. As part of this initiative, a definition of virtual assets was introduced into the Foreign Exchange Act.

By the second half of 2025, South Korea will introduce a new crypto regulation bill that will cover areas such as the coin listing process, the issuance of stablecoins, and disclosure by crypto firms. In April, Korea’s central bank joined in creating the regulation of stablecoins.

In June, the Democratic Party under the leadership of new President Lee Jae-myung introduced a bill to legalize the issuance of stablecoins, aimed at stimulating the growth of the local crypto market.

At the same time, it was announced that the country’s eight largest commercial banks would launch a won-based stablecoin as an alternative to dollar-pegged stablecoins.

And in July, South Korea’s Ministry of SMEs and Startups proposed to provide tax incentives to crypto venture firms.