Dunamu Inc., the operator of South Korea’s largest cryptocurrency exchange Upbit, is hit with a three-month partial business suspension by the country’s financial regulatory body for multiple violations of the country’s special financial transaction law.
The Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) on Tuesday announced disciplinary actions against Dunamu for the crypto exchange operator’s failure to meet key regulatory obligations.
The move will ban Dunamu from transferring new customers’ digital assets to and from other exchanges from March 7 to June 6.
However, over the suspension period, existing customers can continue trading and making transactions in Korean won on the Upbit exchange without interruption.
In addition to the business suspension, the FIU issued a reprimand warning to Dunamu Chief Executive Lee Sirgoo and sanctioned eight other employees with dismissal orders or cautions.
The FIU accused the Korean crypto exchange giant of violating the country’s virtual asset transaction prohibition rules, customer verification requirements and suspicious transaction reporting mandates.
Dunamu was found to have facilitated nearly 45,000 virtual asset transactions with 19 unregistered overseas virtual asset service providers and failed to comply with customer verification obligations in hundreds of thousands of instances, according to the FIU investigation.
The latest measures by the financial regulator underscore Korea’s intensified regulatory scrutiny over cryptocurrency exchanges, aiming to enforce compliance and protect investors in the burgeoning digital asset landscape.
Because of this regulatory action, Upbit could face difficulty in renewing a virtual asset service provider license.
The news will also likely hurt investors’ confidence in the nation’s crypto market.
However, its negative impact could limited, others said.
A reprimand warning typically restricts anyone in a financial company from getting a job for up to five years. But Dunamu CEO Lee can seek another new term because Dunamu is not classified as a financial company under Korea’s current regulations.
In response to the latest sanctions, Dunamu said it will strive to enhance its compliance system to prevent future violations.
An FIU official said that although the authorities’ measure is a sanction rather than a punishment, its decision on license renewal will hinge on whether the identified issues have been rectified.
Authorities are expected to determine whether to fine the crypto exchange operator under the law next month.
By Hyeong-Gyo Seo
seogyo@hankyung.com
Sookyung Seo edited this article.
