The cryptocurrency market in South Korea faced a major regulatory action as one of the country’s largest exchanges, Bithumb, was penalized for failing to follow anti-money laundering rules. The exchange’s chief executive officer, Choi Jae-won, was also officially reprimanded as part of the action.
Authorities said Bithumb will face a fine of 37 billion won (around $24.8 million) and a six-month partial suspension of business operations. The penalties come after regulators found serious lapses in the exchange’s customer verification processes and in transactions with unregistered overseas partners.
The action was announced by the Financial Intelligence Unit, which operates under the Financial Services Commission. The agency is responsible for monitoring financial activities and ensuring that companies follow rules designed to prevent money laundering and other illegal financial activity.
Officials said the investigation uncovered multiple violations, including failure to verify customer identities properly and processing transactions with exchanges that were not registered with South Korean authorities.
Regulatory Action and Fines
The Financial Intelligence Unit found that Bithumb did not comply with customer verification obligations in a large number of cases. About 6.59 million instances were identified where the exchange failed to verify users’ identities according to legal standards.
These identity checks, also called Know Your Customer (KYC) procedures, are crucial for anti-money laundering compliance. They help ensure that exchanges know who their users are and can prevent illegal financial activities, including fraud and money laundering.
In addition, the regulators found that Bithumb allowed transactions with unregistered overseas exchanges. The investigation revealed roughly 45,000 transactions involving 18 foreign platforms that were not registered in South Korea. Transactions with unregistered platforms are considered risky because they may bypass regulatory monitoring.
Due to these violations, the agency imposed a fine of 37 billion won. Alongside the fine, Bithumb will face a six-month partial business suspension, limiting some operations during that period. The Financial Intelligence Unit also said that CEO Choi Jae-won would receive an official reprimand.
The exchange has been given 10 days to submit its opinion before the fine and suspension are finalized.
Identity Verification Rules for Crypto Exchanges
South Korea has strict rules for cryptocurrency exchanges to maintain market transparency and prevent financial crimes. Exchanges must verify the real identities of their users and connect accounts to real-name bank accounts with domestic banks. This ensures that all transactions can be monitored by authorities.
Exchanges are also required to report transactions exceeding certain amounts. Any unusually large or suspicious transactions must be reviewed and reported to regulators. These measures aim to protect the market and reduce risks associated with money laundering or illegal transfers.
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Failure to comply with these rules can result in fines, warnings, or restrictions on business operations. Bithumb’s recent penalties highlight the importance of strict compliance with South Korea’s regulatory framework.
Investigation Findings
The Financial Intelligence Unit’s investigation found serious lapses at Bithumb. Millions of customers were not properly verified, and thousands of transactions occurred with unregistered foreign exchanges. Specifically:
- 6.59 million cases lacked proper identity verification.
- 45,000 transactions involved 18 unregistered overseas exchanges.
Authorities say such transactions pose risks as they may evade local monitoring systems. These findings led to the combined penalties of a 37 billion won fine and six-month partial suspension, along with an official reprimand for the CEO.
The exchange now has 10 days to submit its response before regulators finalize the penalties.
This case highlights South Korea’s strict regulatory approach to cryptocurrency exchanges. The authorities are closely monitoring compliance with anti-money laundering rules, and violations result in significant fines and operational restrictions.