South Korean authorities are investigating Upbit, one of the country’s largest cryptocurrency exchanges, for potentially violating Know Your Customer (KYC) procedures on an unprecedented scale. According to a report by Maeil Business Newspaper on November 14, South Korea’s Financial Intelligence Unit (FIU) identified between 500,000 to 600,000 possible KYC violations tied to Upbit. This scrutiny comes during the exchange’s business license renewal process, putting its operations at risk.

The alleged violations involve Upbit accepting blurry or incomplete ID documents, making it difficult for regulators to verify customer identities. Since 2018, South Korea has required strict KYC compliance, including real-name bank accounts for crypto trading. The FIU claims Upbit bypassed these regulations, potentially exposing the exchange to fines of $71,500 per case and jeopardizing its license renewal.

Upbit’s troubles deepen as it faces a separate monopoly investigation by the Financial Services Commission (FSC). Authorities are examining its close ties with K-Bank, a major South Korean bank with significant crypto exposure. Reports suggest 70% of K-Bank’s deposits are linked to cryptocurrency, raising concerns over its dependency on Upbit. These issues forced K-Bank to cancel a $732 million IPO in October 2023, citing high valuation risks tied to its crypto relationships.

Founded in 2017, Upbit processes $2.2 billion in daily trading volume, making this investigation a critical moment for South Korea’s crypto sector. With mounting regulatory scrutiny and potential penalties, the outcome of these probes could significantly impact the country’s cryptocurrency landscape.