 ▲ Bithumb © |
Bithumb, one of South Korea’s major virtual asset exchanges, has been hit with heavy sanctions from financial authorities for failing to properly fulfill even the financial sector’s basic obligation of anti-money laundering (AML). Amid ongoing controversy over poor internal controls in the crypto industry, this severe punishment starkly illustrates that moral hazard among exchanges has reached a dangerous level.
According to financial industry sources and regulators on the 9th, the Financial Intelligence Unit (FIU) under the Financial Services Commission pre-notified Bithumb last month of heavy sanctions, including a “partial business suspension for six months” and a “disciplinary warning for its CEO,” citing violations of the Act on Reporting and Using Specified Financial Transaction Information. The exchange, which has advocated for institutional recognition, is expected to suffer a critical blow for undermining the transparency of fund flows—one of the strictest requirements under the law.
The core violations cited by the FIU include ongoing transactions with unreported overseas virtual asset service providers and negligence in fulfilling customer verification (KYC) obligations. This is tantamount to leaving major channels for money laundering unchecked, underscoring serious flaws in Bithumb’s compliance and internal monitoring systems that are meant to safeguard investor protection and market integrity.
An even bigger issue is that such violations are not unique to Bithumb. The FIU has already imposed a three-month partial business suspension and a hefty fine of 35.2 billion won on Dunamu (Upbit) over similar matters, while Korbit received a 2.73 billion won fine and an institutional warning. With Gopax and Coinone also undergoing sanction procedures, criticism is mounting that virtually all major exchanges operating KRW markets have failed to meet even the most basic requirements.
A Bithumb official sought to downplay the six-month partial suspension, stating that it only restricts virtual asset transfers for new members, while existing users can continue to deposit, withdraw, and trade both fiat currency and virtual assets as usual. The company added that the measure is still at the pre-notification stage for collecting opinions as part of the administrative process, and that it will fully explain past shortcomings and improvement efforts through official procedures. However, it remains uncertain whether Bithumb will be able to avoid regulatory penalties at the upcoming FIU Sanctions Review Committee, which is expected to convene as early as this month.
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