South Korea Has Momentarily Revoked Upbit's Three-Month Restriction on Onboarding New Customers

Dunamu has taken legal action against the financial regulator, fighting to reverse the sanction while also requesting an injunction to temporarily suspend the ban.

A court in South Korea has momentarily stayed the Financial Intelligence Unit’s (FIU) three-month restriction on Upbit onboarding new customers.

The Dunamu-operated exchange had taken legal action against the financial regulator.

South Korea’s FIU imposed a three-month suspension on deposit and withdrawal activities for newly registered clients with Upbit on February 25.

The FIU previously explained that Upbit’s non-compliance with regulations preventing dealings with unregistered Virtual Asset Service Providers (VASPs) led to the sanction.

The regulator also mentioned Upbit’s parent firm, Dunamu, appealed against the FIU’s sanction and requested an injunction to suspend the ban.

Local media outlet Newsis reported that the court approved an injunction, postponing the suspension order until 30 days after a judgment is reached. This ruling allows Upbit to continue registering new clients.

The FIU is yet to comment on the court’s decision.

Upbit, South Korea’s largest cryptocurrency exchange, has been operating since 2017.

On October 10, South Korea’s Financial Services Commission (FSC) launched an official investigation into Upbit to determine whether the exchange had engaged in anti-monopoly practices.

The regulator is scrutinizing the exchange not only for anti-monopoly infractions but also for possible violations of Know Your Customer (KYC) guidelines.

On November 15, the FIU announced that it had identified between 500,000 and 600,000 possible KYC violations involving the exchange.

Later in the month, the South Korean police confirmed Upbit’s 2019 cyber attack resulting in the loss of 342,000 ETH, was orchestrated by the infamous North Korea-linked Lazarus Group.

The reports come amid a broader crackdown on crypto firms in South Korea.

Earlier in February, the FIU announced it was revoking the licenses of 16 cryptocurrency exchanges for failing to meet KYC requirements.

The regulator’s actions follow a 2018 ruling by the Supreme Court of Korea, which struck down a ban on anonymous crypto trading.

The updated policy requires users to pass KYC procedures before they can trade cryptocurrencies on platforms like Upbit.

Alongside the other claims, the FIU accused Upbit of engaging in 45,000 transactions with foreign crypto exchanges that were operating without registration.

By engaging in such activities, Upbit violated South Korea’s legal framework under the Act on Reporting and Using Specified Financial Transaction Information.

The reports come as the South Korean government pushes forward with its agenda to enhance monitoring of international cryptocurrency transactions.

On October 25, 24, Finance Minister Choi Sang-Mok stated that the government will enforce a reporting obligation for firms handling digital asset transfers across borders.

The government aims to establish early monitoring mechanisms for cryptocurrency dealings linked to tax evasion and financial manipulation.

Choi also mentioned that administrative sanctions will be imposed on exchanges that fail to comply with cryptocurrency theft reporting obligations.

At the FIU’s request, Google Play disabled the apps of 17 crypto exchanges in South Korea to align with regulatory requirements.

The FIU stated that it is actively working on restricting exchange availability on both the internet and Apple’s App Store.