South Korea Authorities Plan Partial Ban on Bithumb Services After AML Probe

South Korea regulators plan a six-month partial suspension for Bithumb after AML probe, restricting new users’ crypto transfers pending a review decision.

South Korean financial authorities plan disciplinary action against the crypto exchange Bithumb. Regulators sent a preliminary notice for a six-month partial business suspension. The measure follows alleged breaches of anti-money laundering obligations. However, existing users are allowed to continue trading digital assets as usual during the review period.

Regulators Issue Preliminary Notice Over AML and KYC Violations

Bithumb had received an earlier notice from the Financial Intelligence Unit. The agency is operated under the Financial Services Commission. According to a report from

News1, the authorities discovered potential violations of financial compliance regulations.

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The FIU said Bithumb was allegedly in violation of provisions of the Special Financial Transactions Act. This law is in place for the anti-money laundering rules for virtual asset service providers. Therefore, strict identity verification and transaction monitoring of users must be carried out by exchanges.

Meanwhile, regulators showed concern about Bithumb’s dealings with overseas virtual asset operators. Authorities said these operators were not all properly reported to the regulators. As a result, the FIU determined it failed to comply with compliance procedures.

In addition, investigators cited deficiencies in customer verification processes. Regulators said Bithumb failed to conduct proper know-your-customer checks. These checks are necessary to ensure identities and to prevent suspicious financial activities.

As a result, the FIU proposed a six-month partial suspension of specific services. In addition, disciplinary measures against the company’s chief executive were also proposed by regulators. However, the final decision will be based on the meeting of a sanctions review committee that is scheduled this month.

Suspension Would Limit Transfers for New Crypto Exchange Users

Authorities clarified that the proposed restrictions will primarily hit the new users of the exchange. New members may be subject to some restrictions on their transfer of cryptocurrencies during the suspension period. However, the current users shall be able to continue with normal trading activities without any disruption.

Existing customers can still deposit and withdraw Korean Won via the platform. In addition, digital asset trading will be available for these accounts. Therefore, the restrictions are mainly for onboarding activities and external transfers of crypto for new users.

Financial authorities have taken similar enforcement actions against other exchanges. Last year, regulators approved Dunamu, which operates Upbit, for similar compliance issues. The FIU ordered a three-month partial suspension and a 35.2 billion won fine.

Earlier this year, regulators also fined Korbit for regulatory deficiencies. Authorities issued an institutional warning and a 2.73 billion won fine. These actions show growing oversight of the South Korean digital asset industry.

Meanwhile, sanctions reviews for Coinone and GOPAX may also be coming soon. Regulators plan to check compliance standards in several crypto exchanges.

A representative of Bithumb stated that the measure is still a preliminary notice. The company said the restriction aims to restrict virtual asset withdrawals for new members only. Therefore, the exchange anticipates potential adjustments in the process of sanctions review.

Overall, the case is indicative of tighter regulatory scrutiny in the cryptocurrency market in South Korea. Authorities continue to increase control rules under the Special Financial Transactions Act. As a result, exchanges will need to enhance their AML monitoring and customer verification systems to avoid future sanctions.

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