South Korea pauses Upbit’s 3-month ban on serving new clients

The partial business suspension of Upbit, the biggest crypto exchange in South Korea, was temporarily lifted by a South Korean court. This suspension would have prevented the trading platform from servicing new clients for a period of three months. 

The 5th Administrative Division of the Seoul Administrative Court, Presiding Judge Soonyeol Kim, agreed to hear the application for a stay of execution that Upbit operator Dunamu had made against the Financial Intelligence Unit (FIU) the day before.

So, the effect of Upbit’s partially shut-down business will be put on hold until the main lawsuit made by Dunamu is over. More specifically, the effect will be put on hold until 30 days after the main lawsuit’s verdict. This is a means to buy some time for Dunamu. This lets Upbit serve new customers while the court case goes on. 

The FIU and Dunamu are to engage in a fierce battle over sanctions

According to the FIU, Dunamu, its executives, and its workers should face harsh punishments for breaking the Special Financial Transactions Act on the 25th of last month.

During an anti-money laundering inspection that took place from August to October of last year, it was found that Upbit supported transactions with unreported foreign virtual asset exchanges and let transactions happen without customer verification measures. 

In 2018, South Korea’s government stopped letting its people trade crypto anonymously. Users must now go through Know Your Customer (KYC) checks before they can sell digital assets on crypto trading platforms like Upbit.

So, Upbit was given a 3-month partial suspension of business that stops new users from transferring virtual assets, including deposits and withdrawals. People in charge, like CEO Lee Seok-woo, were reprimanded, and the compliance officer was dismissed.

Then, on the 27th of last month, two days after the harsh punishment was finalized, Dunamu went to the administrative court and asked that the partial suspension of business be lifted and the punishment not be carried out right away.

In addition to these claims, the FIU said that Upbit facilitated 45,000 transactions with foreign crypto exchanges that were not listed. The Act on Reporting and Using Specified Financial Transaction Information says that this is not allowed.

Meanwhile, Upbit’s trading volume has declined 87% from a high of $17.2 billion on January 9 to $2.1 billion currently. However, it is still one of the biggest crypto platforms in South Korea and the world. CoinGecko’s trust score ranks it as the 23rd-best exchange in the world.

Rules for regulating crypto in South Korea

South Korea is taking steps to create a regulatory system focused on cryptocurrencies. Talks have begun between the Financial Services Commission and other groups about the next set of rules for cryptocurrencies, which will focus on stablecoins and protect customers.

As of October 25, 2024, South Korea tightened its control over deals involving crypto assets that happen across borders. Choi Sang-Mok, the country’s finance minister, said that the government will require companies that deal with digital assets across borders to file reports.

This is meant to encourage early tracking of crypto transactions that are “used for tax evasion and currency manipulation.”

In line with the rules, the FIU asked South Korea’s Google Play to stop the apps of 17 crypto exchanges. The FIU also said it is trying to make it harder to access the exchange through the Internet and Apple’s App Store.  

The country’s work to fight growing crypto risks, especially with the US and Japan, is supposed to be a show of its concern about user safety. The three countries have put out a paper warning of the dangers that North Korean hackers pose to cryptocurrencies.

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