South Korea's Financial Intelligence Unit (FIU), operating under the Financial Services Commission, has issued a preliminary sanction notice to Bithumb, the country's second-largest cryptocurrency exchange. The proposed penalty includes a six-month partial suspension of operations and a hefty fine, reportedly amounting to tens of billions of South Korean won, for failures in anti-money laundering (AML) compliance.
The core of the regulatory action centers on deficiencies in customer identity verification and Know Your Customer (KYC) procedures. Authorities cited shortcomings in customer due diligence and raised concerns about Bithumb's dealings with unreported overseas virtual asset operators. The FIU is also considering disciplinary action against the exchange's senior management, including its chief executive.
The proposed suspension is partial, meaning it would not completely halt the exchange. Existing users would be allowed to continue trading, making Korean won deposits and withdrawals, and holding assets. However, transfer services for new members would be restricted, limiting their ability to move virtual assets during the sanction period.
Bithumb has acknowledged receiving the preliminary notice but emphasized it is not a final order. A company official stated, "This measure is not a final sanction, but rather a preliminary notice," adding that the level of punishment could change during the review process. The exchange plans to present its defense in subsequent meetings with regulators.
This action follows a damaging internal control failure at Bithumb in February, where a system flaw led to an erroneous transfer of approximately 620,000 Bitcoins (worth over $40 billion at the time) during a promotion. While most of the Bitcoin was recovered, regulators noted some were sold before accounts were frozen, adding to the compliance pressure.
The FIU is expected to hold a sanctions review committee this month to decide the final punishment. This case is part of a broader regulatory crackdown on South Korean exchanges, with Coinone and GOPAX also under review for compliance standards. The move signals intensifying regulatory scrutiny on AML controls and customer checks within the country's crypto sector.
