The Korean code landscape is undergoing a dramatic transformation. The market has witnessed a scrutiny of regulations amid evolving partnerships between banks and crypto exchanges. Upbit, the largest crypto exchange in Korea, is at the forefront of this evolving situation.
The exchange faces sanctions due to failures in compliance, despite traditional financial institutions being far more willing to cooperate with cryptocurrency exchanges.
Upbit is currently being scrutinized by the South Korean Financial Services Commission (FSC). The company has ordered more than 70% of the Korean crypto market share. Recent reviews during the company's license renewal revealed that they have violated more than 700,000 compliance.
A local media report published on February 18, 2025 covered FSC Governor Kim Byoung-Hwan as he announced sanctions against Upbit for breaching the company's obligation to verify clients. It'll end soon.
Upbit faces regulatory challenges
@official_upbit As South Korea tightens its crypto regulations, it will be fined for over 700,000 KYC violations.#upbit #FSChttps://t.co/szzylt4ted
– cryptonews.com (@cryptones) February 18, 2025
The Upbit violations included customer ID verification protocols and other important measures implemented to combat money laundering. These are serious implications. Under the Special Financial Transactions Act, the penalty for each violation in this case could attract a fine of up to $68,600. The final penalty tally could be billions.
Fans advocate strict compliance with anti-money laundering regulations to maintain the integrity of South Korea's financial system.
Previously, on October 10, 2024, at a Congressional session, he maintained the need to investigate South Korea's market monopoly, which was made by large crypto exchanges like Upbit.
K Bank's Upbit accounts for 4 trillion won, which amounts to 22 trillion won, or approximately 20% of the bank's total deposits. Hypothetically speaking, if Upbit trading disruption occurs, it could lead to banking operations at K Bank.
K-Bank's decision to offer a 2.1% interest rate on UPbit deposits was also raised in question. In particular, banks' operating profit margins are less than 1%.
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Changes in dynamics between banks and crypto exchanges
In parallel with Upbit's regulatory issues, Korean banks are increasingly hoping to partner with Crypto Exchanges.
With the imminent expiration of the agreement between Upbit and its current bank partners, K Bank has been raising interest among other financial institutions and is partnering with the exchange.
The banks are also monitoring other major South Korean crypto exchanges, respectively, including the deals between Conon and Corbita's Cacao Bank and Shinhan Bank.
The Korean crypto market is growing, and banks want to take advantage of the growing user base. In an interview dated February 9, 2025, Chairman of the Korean Exchange Yoon Eun-bo said, “Korea is the third largest physical cryptocurrency trader in the world. Cryptocurrency is a sector that can create new value in the financial industry. is.”
With the regulatory framework for Crypto becoming more clear, traditional financial institutions are keen to roll this asset class dice.
A recent partnership with another Korean crypto exchange, Bitham, and its bank partner KB Cookmin Bank, sets the tone of what is expected in the future as the bank warms up to crypto.
Bithumb, a domestic virtual asset exchange, has signed a deal with KB Kookmin Bank for a realistic verification deposit/withdrawal account partnership. If approved by financial authorities, Bithumb users can deposit Koreans and withdraw…
– Bitcoin World Media (@itsbitcoinworld) August 14, 2024
This means a reversal from previous situations in which crypto exchanges actively search for bank partners and are actively involved in the traditional financial system.
This demonstrates the broader acceptance of crypto and the assimilation of digital assets into mainstream South Korea funds.
However, supply has been low while demand for partnerships is growing. Only five Korean crypto exchanges have the necessary permissions to provide KRW crypto pairing.
Of these five, Gopax has been battling economic turmoil after failing to attempt a acquisition from Binance.
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The future meaning of the Crypto-Bank Alliance
Along with regulation enforcement, the serious ties between banks and exchanges indicate South Korea's mature crypto market.
For banks, the partnership with crypto exchanges represents a bridge to new customers and market relevance. Merging traditional financial products with modern digital assets and solutions can lead to the development of new financial products and services.
But it's not all sun and rainbow. Traditional financial institutions affiliated with crypto exchanges pose market consolidation risks.
Regulators cannot ignore the potential monopoly trends of large-scale exchanges like upbit. Authorities must prevent a single exchange or entity from exercising disproportionate effects.
Explore: South Korea links upbit crypto heist of $42 million to North Korea
Key takeout
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Upbit faces potential sanctions that exceed 700,000 non-compliance violations.
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South Korean banks want to partner with crypto exchanges as regulations become clearer.
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The Korean crypto sector is mature and balances the expansion of financial partnerships with strict adherence.
South Korean banks are eager to attack transactions with crypto exchanges, even if upbit first appeared in 99 bitcoin.
