Upbit is under investigation by the Financial Services Commission (FSC) of South Korea over lapses in know-your-customer (KYC) procedures for at least 500,000 to 600,000 accounts.
The violations, discovered during a license renewal review, included accounts opened with blurred ID cards and incomplete verification, according to a report from Maeil Business Newspaper.
The violations could result in fines of up to 100 million won ($71,740) and potentially complicate Upbit’s license renewal. The FSC has not disclosed further details about the probe, and South Korea’s largest cryptocurrency exchange has yet to comment on the allegations.
Ranked fifth among top global spot exchanges on CoinMarketCap, Upbit processed over $7.7 billion in trading volume in the past 24 hours and exceeded $48.2 billion in October alone.
However, the exchange has been under increased scrutiny, with FSC Chair Kim Byung-hwan previously announcing plans to investigate South Korea’s monopolistic crypto market structure, where Upbit dominates.
According to a report by local news agency Infomax, the FSC’s investigation is tied to concerns about Upbit’s relationship with online bank K-Bank.
Operated by Dunamu, one of South Korea’s most valued startups, Upbit stands as the country’s largest cryptocurrency exchange by trading volumes. It secured in-principal approval for a major payment institution license from the Monetary Authority of Singapore (MAS) back in October, which accentuates the exchange’s expansion across the Asia Pacific region. As reported, Upbit has established legally compliant branches in both Indonesia and Thailand.
During an audit by the South Korean parliament, lawmaker Lee Kang-il raised concerns about Upbit’s dominant market position and its influence on K-Bank’s deposits, suggesting this relationship could pose a bank-run risk.
FSC Chairman Kim Byung-hwan acknowledged the monopoly issue and confirmed that the regulator would investigate Upbit’s structure in response to these concerns. He added that the situation would be reviewed following the implementation of the Electronic Financial Transaction Act, which came into effect on September 15.
Reports indicate that up to 70% of K-Bank’s deposits were tied to crypto assets in late 2023, highlighting the deep financial connections between the bank and Upbit. K-Bank, which partnered with Upbit since at least 2021, filed for an initial public offering (IPO) in Seoul that could raise up to $732 million, marking the largest public listing in South Korea in nearly three years.
