South Korea’s largest cryptocurrency exchange, Upbit, is facing a potential suspension of its operations due to over 700,000 violations of Know Your Customer (KYC) requirements. The country’s financial regulator, the Financial Intelligence Unit (FIU), has issued a warning to Upbit for failing to properly implement KYC processes and anti-money laundering (AML) obligations.

According to the Maeil Business Newspaper, the FIU notified Upbit on January 9th that it could face a suspension of up to six months. During this period, the exchange would not be allowed to onboard new customers, although existing users would still be able to trade. Upbit has until January 20th to respond to the FIU’s findings, after which a final decision on the suspension will be made.

In addition to the KYC violations, the regulator is also investigating whether Upbit violated any rules by conducting business with unregistered foreign cryptocurrency firms. Upbit has claimed that it was challenging to identify foreign exchanges in advance, but maintains that there was no intention to break the law.

Following the discovery of the violations, the FIU suspended Upbit’s license renewal as South Korean authorities need more time to investigate the large number of suspected KYC breaches. Upbit could potentially face fines of up to 100 million Korean won (approximately $71,500) per case, with the total amount reaching 35.8 billion Korean won ($27 million) due to the high volume of violations.

This development comes at a time when South Korea is working on drafting new regulations for the cryptocurrency industry. Upbit’s situation serves as a reminder of the importance of compliance with KYC and AML requirements in the rapidly evolving crypto market. The outcome of the FIU’s investigation into Upbit’s violations will have significant implications for the exchange and the broader cryptocurrency sector in South Korea.