Bithumb, South Korea’s second-largest cryptocurrency exchange, on March 9 received advance notice of possible regulatory penalties from the Financial Intelligence Unit under the country’s Special Financial Transactions Act.
The notice outlines potential disciplinary measures, including a six-month partial business suspension and questioning of the company’s chief executive.
The action follows concerns from regulators about the exchange’s compliance with anti-money-laundering obligations. Authorities believe the platform did not adequately enforce customer verification requirements in certain transactions.
The FIU flagged cases involving trading activity linked to overseas virtual asset operators where identity verification procedures were reportedly insufficient.
The regulator issued the notice as a preliminary step. It informs the exchange about possible sanctions before a final ruling. Industry officials said the notice allows the company to present its explanation or defense before the penalties are finalized.
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Regulators focused on issues related to Know-Your-Customer procedures and anti-money-laundering monitoring. Officials determined that Bithumb allowed some trades involving foreign virtual asset operators without proper verification measures.
Such activity raised concerns that compliance standards required under financial regulations were not fully maintained. This was considered a serious issue, as customer verification is a key aspect of financial crime prevention.
The Special Financial Transactions Act requires digital asset exchanges to verify user identities and monitor transactions that may be involved in suspicious activity.
This is not the first time that the authorities have taken action against the exchanges due to compliance concerns. Last year, the FIU handed the exchange a three-month business suspension and a fine of 352 billion won over similar compliance concerns.
At the start of the year, another Korean exchange, Korbit, was handed a fine of 273 million won and an institutional warning over similar compliance concerns.
If the new sanctions are implemented, they would affect virtual asset transactions involving new registered members. However, existing members would still be able to deposit or withdraw their money. Trading between the Korean Won and virtual assets would not be affected by the new sanctions.
Regulators are expected to convene a sanctions committee within the month to decide the extent of the penalty. Following the decision in the case of Bithumb, regulators are expected to proceed with the case against exchanges like Coinone and Gopax.
Stricter AML and KYC regulations in South Korea may put more pressure on the major crypto exchanges that are subject to the SFTA.
For example, restrictions placed on Bithumb may be a sign of more regulatory scrutiny for the compliance standards of other exchanges, including Coinone and Gopax.
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