South Korea imposes 3-month ban on Upbit servicing new clients

The South Korean Financial Intelligence Unit has imposed a three-month ban on crypto deposits and withdrawals for new Upbit customers. The South Korean cryptocurrency exchange also emphasized that the ban “may be subject to change” via procedures in accordance with relevant regulations.

Upbit iterated that the sanction by the financial authorities was intended to prevent money laundering and strengthen compliance systems. The firm said that it fully understood FIU’s decisions and plans to further enhance its internal control system.

South Korea imposes a 3-month ban on Upbit servicing new clients

FIU sanctions Upbit, restricts new customer crypto transfers for 3 months.

New customer deposits/withdrawals banned for 3 months; CEO/staff warned.

Not a big deal. Existing customers trade without limits; new members only temporarily restricted from external crypto transfers,… pic.twitter.com/MIWxPEa1gy

— Ryan Yoon | TigerResearch (@ryanyoon_eth) February 25, 2025

Upbit was issued a partial business suspension by the country’s Financial Intelligence Unit (FIU) on February 25 that temporarily restricted new customer transactions. The FIU argued that the suspension was in response to Upbit’s violations of South Korean policies. The financial regulator had also prohibited exchanges from facilitating transactions with unregistered crypto asset service providers (CASPs).

The South Korean crypto exchange addressed the FIU’s suspension on its website and apologized to its customers for any inconvenience. The firm acknowledged that it has reviewed the necessary improvements made in response to the sanction by the financial authorities and completed the measures.

“The sanctions imposed this time may be subject to change through procedures in accordance with relevant regulations, and if the effect of the relevant measures is suspended or terminated, new members will also be able to use Upbit’s  service without restrictions.”

-Upbit.

The cryptocurrency exchange also argued that some “specific facts and circumstances” had not been considered in relation to the scope of sanctions. Upbit added that some of the specifics in the sanctions may be amended in the future. The firm also highlighted that it would provide further information if it reaches an agreement with authorities regarding potential changes to the sanctions

South Korea highlighted that it will reveal the second phase of its crypto regulatory framework in the second half of 2025. The country believes that the upcoming reforms will address gaps in the current system, with a strong focus on enhancing AML measures and tightening KYC protocols.

Upbit’s sanctions follow months of regulatory scrutiny from regulators

The 3-month ban follows months of mounting regulatory scrutiny, where the FIU flagged 600,000 potential KYC violations at Upbit in mid-November. South Korea’s Financial Service Commission (FSC) issued an advanced notice to Upbit on January 9 to temporarily suspend operations. 

The FSC had also launched an antitrust investigation into Upbit in October, which probed allegations of market dominance and unfair practices. Local media also reported that the lapses were uncovered during an extensive review tied to Upbit’s business license renewal.

The FIU had conducted on-site inspections after the crypto exchange filed an application to renew its business license in August 2024. The firm’s business license reportedly expired in October last year, and its renewal application was still under review.

The FSC chairman, Byoung Hwan, urged authorities to ensure that cryptocurrency exchanges uphold fair competition standards. The Financial Services Commission had also extended its investigations to Upbit’s relationship with K Bank, South Korea’s first internet-only bank. Lee Kang-il, a lawmaker who presented the matter to FSC, stated that the crypto exchange’s deposits accounted for 4 million won ($2,741,669,608) of K Bank’s 22 trillion won ($15,079,182,844) in total.

Kang-il had argued that any disruptions to Upbit’s operations could potentially trigger a bank run on K Bank since the exchange represented 20% of the bank’s holdings. The lawmaker also criticized the bank for offering an unsustainable 2.1% interest rate on deposits from the exchange’s customers.

Upbit’s sanction came amid record-high crypto adoption in South Korea, with over 30% of the population now invested in digital assets. The country also recorded $7.6 billion from Upbit in 24-hour transaction volume in 2024. It was also the third largest cryptocurrency exchange in the world late last year in terms of trading volume, with over $283 billion worth of transactions. The digital asset exchange also dominates the local crypto ecosystem with around 70% market share.

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