Upbit’s parent company, Dunamu, has initiated legal action against South Korea’s Financial Intelligence Unit (FIU), challenging the regulatory sanctions imposed on the cryptocurrency exchange. The lawsuit, filed on February 27 with the Seoul Administrative Court, seeks to overturn the FIU’s partial business suspension order. Additionally, Dunamu has applied for an injunction to halt the enforcement of these sanctions, arguing that they were imposed unfairly.
Regulatory Crackdown on Upbit
The legal battle follows the FIU’s decision to suspend certain operations of Upbit, South Korea’s largest crypto exchange. Under the order, new customers are restricted from processing external crypto transactions, though existing users remain unaffected. The FIU also issued disciplinary measures against nine Upbit executives, including CEO Lee Seok-woo, citing violations of local financial regulations. In an unprecedented move, the exchange’s compliance officer was dismissed by regulators.
Monopoly Concerns and KYC Violations
Upbit has long been under scrutiny for its dominant position in South Korea’s crypto market. During a parliamentary audit in October 2024, lawmakers criticized the Financial Services Commission (FSC) for allegedly favoring Upbit and failing to curb monopolistic practices. The FIU subsequently launched a probe, uncovering extensive Know Your Customer (KYC) compliance violations.
According to regulators, Upbit facilitated over 45,000 transactions with unregistered foreign exchanges, violating South Korea’s financial transaction laws. Additionally, the exchange allegedly failed to enforce stringent customer verification measures, accepting photocopied ID cards instead of originals and neglecting proper authentication of driving licenses. A compliance test further revealed that Upbit’s system erroneously validated a hand-drawn ID as legitimate, though the FIU clarified that this was not classified as a regulatory breach.
Upbit Defends Its Position
Upbit has since implemented corrective measures to address the identified deficiencies. In a statement, the company acknowledged the regulatory concerns but argued that the severity of the sanctions was disproportionate.
“We believe that certain circumstances and details regarding the reasons for some of the sanctions were not fully considered. Therefore, we will faithfully present these points through the procedures stipulated by the relevant regulations,” Upbit stated.
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As the lawsuit unfolds, the outcome could have significant implications for South Korea’s crypto regulatory landscape, potentially setting a precedent for how exchanges interact with government authorities.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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