Investors Shocked by Upbit Sanctions... But Upon Closer Look, "Operating Normally"

Upbit, the No. 1 virtual asset exchange in South Korea, is being sanctioned by the Financial Intelligence Unit (FIU) under the Financial Services Commission. The sanctions include a three-month partial suspension of operations, which led some investors to mistakenly believe that Upbit would be completely unavailable, causing confusion.

However, the actual sanction restricts certain service transactions only for new users during a specified period. It is not a full "business suspension" as has been incorrectly reported.

According to industry sources on the 26th, the FIU imposed sanctions on Upbit the previous day for failing to comply with anti-money laundering (AML) obligations, including violations of the Know Your Customer (KYC) system. The FIU held a total of three sanction review committee meetings to finalize the sanctions against Upbit.

The sanctions primarily restrict new members from transferring virtual assets from Upbit to other exchanges or external wallets for three months. Existing members can continue to use all services normally. New members can also register, deposit and withdraw Korean won, and trade virtual assets without any issues.

Dunamu, the operator of Upbit, stated, "We respect the financial authorities' decision on this matter and have promptly completed improvement measures to address the shortcomings." They added, "Since there are circumstances where specific facts and related conditions regarding some reasons for the measures and the level of sanctions were not sufficiently considered, we will sincerely explain these points according to the procedures stipulated in the relevant regulations."

When news of the FIU's sanction confirmation spread, some communities mistakenly believed that Upbit would be forced to cease operations, causing confusion among investors. In one community where virtual asset investors are active, comments such as "Is the country's No. 1 exchange shutting down?" were posted.

However, after Upbit posted a customer notice immediately upon receiving the FIU sanction notification, investors responded with comments like "I thought it was a business suspension, but it wasn't," "Only new customers are restricted from transferring virtual assets to other exchanges," "I was shocked thinking I couldn't use Upbit," and "Fortunately, there is no impact on existing customers."

The FIU conducted an on-site inspection of Upbit in August last year. This year, Bithumb and Coinone are scheduled for FIU on-site inspections. This sanction against Upbit is the first imposed on a virtual asset business operator for violating AML obligations. The industry expects that the results of this inspection will influence inspections of other virtual asset exchanges.