Why did South Korea’s FIU impose a 3-month ban on Upbit’s new client registrations?

South Korean crypto giant Upbit has been slapped with a three-month ban on new customer transactions after regulators flagged violations of local compliance rules.

A February 25 statement from South Korea’s Financial Intelligence Unit (FIU) states that Upbit failed to prevent transactions with unregistered crypto asset service providers (CASPs) and fell short of critical Know Your Customer (KYC) obligations.

As such, Dunamu Inc., the operator of Upbit, has been hit with a partial business suspension that prohibits new customers from transferring virtual assets between March 7 and June 6, 2025.

The ban only impacts deposits and withdrawals for new accounts, and existing customers can continue using all services without restrictions.

Why was Upbit banned?

According to the FIU’s findings, Upbit facilitated nearly 45,000 transactions involving 19 unregistered crypto service providers between August 2022 and August 2024, directly violating South Korea’s anti-money laundering (AML) laws.

Additionally, Upbit’s KYC process was found to be severely lacking. Authorities uncovered over 34,000 instances where Upbit approved customer verification using incomplete or improperly documented IDs, including black-and-white photocopies, blurred images, and screenshots instead of official documents. 

In over 15,000 cases, customers were allowed to trade even before completing full identity verification.

Further investigations revealed over 5,700 cases where users provided incomplete or incorrect addresses—some were left blank, while others contained outdated or inaccurate information. Upbit reportedly did not flag or restrict transactions linked to these accounts.

The sanctions impact not only Upbit’s customers but also its internal operations.

The FIU issued a warning to one executive, while two employees were dismissed, five received formal reprimands, and two others were cautioned for failing to enforce compliance measures effectively.

Upbit apologizes to customers

Upbit has acknowledged the sanctions and has issued a public apology for the “inconvenience caused” to its users.

“We will do our best to enhance the internal control system by focusing all of our company’s capabilities going forward,” it added.

Notably, the exchange has “completed the necessary improvements” in response to the FIU’s findings.

However, Upbit suggested that certain “specific facts and circumstances” behind the sanctions were not fully considered and promised to provide clarifications through proper legal channels.

Upbit also noted that the severity of the sanctions could change through “procedures in accordance with relevant regulations.”

Should the restrictions be lifted or altered, new users will regain full access to the platform’s services.

As previously reported by Invezz, the FIU launched a probe into Upbit back in November 2024.

That investigation uncovered between 500,000 and 600,000 potential KYC breaches.

South Korea to lift trading ban on corporations

The Upbit ban comes as lawmakers in the country have fast-tracked efforts to push out crypto regulations this year.

On February 13, the Financial Services Commission announced plans to gradually ease the long-standing ban on institutional crypto trading as a part of its second wave of crypto regulations.

Phase one of the roadmap is expected to be live by the first half of 2025 and will allow law enforcement agencies, non-profit organizations, school corporations, and universities to sell cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH).

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