South Korea temporarily lifts Upbit’s 3-month ban on new users

Dunamu sued the country's financial regulator, seeking to overturn the sanctions and apply for an injunction to temporarily lift the ban.

A South Korean court has temporarily lifted a partial business suspension order on cryptocurrency exchange Upbit, which had previously banned the trading platform from serving new users for three months.

On February 25, South Korea's Financial Intelligence Unit (FIU) imposed sanctions on the exchange, imposing a three-month ban on deposits and withdrawals from new users. The FIU previously said that the suspension order was in response to Upbit's violation of a policy that prohibits exchanges from dealing with unregistered virtual asset service providers (VASPs).

In response to the FIU sanctions, Upbit's parent company Dunamu filed a lawsuit against the FIU, seeking to overturn part of the suspension order. In addition, Dunamu applied for an injunction to temporarily lift the suspension order.

On March 27, local media Newsis reported that the court approved the injunction, postponing the suspension order until 30 days after the court's decision. This allows Upbit to continue serving new users during the legal battle.

Investigation of Upbit Leads to 3-Month Suspension Order

Founded in 2017, Upbit is the largest cryptocurrency exchange in South Korea. On October 10 last year, the country's Financial Services Commission (FSC) launched an investigation into Upbit for possible violations of the country's antitrust laws.

In addition to antitrust violations, the exchange is also suspected of violating know-your-customer (KYC) rules. On November 15, the FIU confirmed that the exchange had at least 500,000 to 600,000 potential KYC violations. The regulator discovered these alleged violations when reviewing the exchange's business license renewal.

In 2018, South Korean regulators ended anonymous cryptocurrency trading for its citizens. With the implementation of the new regulations, users must pass the KYC procedure before they are allowed to trade digital assets on cryptocurrency trading platforms such as Upbit.

In addition to these allegations, the FIU also accused Upbit of facilitating 45,000 transactions with unregistered foreign cryptocurrency exchanges. This violated the country's Specific Financial Transaction Information Reporting and Use Act.

South Korea Cracks Down on Overseas Exchanges

On October 25, 2024, South Korea strengthened its supervision of cross-border crypto asset transactions. The country’s Finance Minister Choi Sang-Mok said the government will introduce mandatory reporting requirements for businesses that handle cross-border transactions of digital assets.

This is intended to facilitate pre-emptive monitoring of cryptocurrency transactions “used for tax evasion and currency manipulation.”

Under the regulations, the Korean Google Play Store blocked the apps of 17 cryptocurrency exchanges at the request of the FIU. The FIU said it is also working to restrict access to these exchanges via the internet and the App Store.