Bithumb faces proposed 6-month suspension over AML breaches

Bithumb, a South Korean cryptocurrency exchange founded in 2014 and ranked second by domestic trading volume per CoinGecko, has reportedly received a preliminary notice from the Financial Services Commission’s Financial Intelligence Unit (FIU) proposing a six-month partial suspension and disciplinary action against the exchange’s chief executive over alleged anti-money laundering (AML) and Know Your Customer (KYC) failures.

Regulators said Bithumb continued transactions with overseas virtual asset businesses that were not registered in South Korea and failed to properly enforce certain KYC procedures.

The proposed restriction would bar virtual asset transfers for newly registered users while allowing existing customers to deposit and withdraw Korean won and cryptocurrencies and to trade on the platform, according to the report.

The penalty is not final and the FIU plans to convene a sanctions deliberation committee later this month to determine the final penalty.

The move follows a recent incident in which Bithumb mistakenly distributed billions of dollars’ worth of bitcoin to users and comes amid tighter regulatory scrutiny of Korean cryptocurrency platforms.

Last year, the FIU imposed a three-month partial suspension and a 35.2 billion won (US$24 million) fine on Dunamu, operator of Upbit, and fined Korbit 2.73 billion won (US$1.9 million) with an institutional warning for similar compliance failures.

🔗 Source: CoinDesk

🧠 Food for thought

Implications, context, and why it matters.

Bithumb’s proposed suspension would last twice as long as Upbit’s partial restriction

Regulators are weighing a six-month ban on new-user registrations at Bithumb, twice the three-month limit they placed on market leader Upbit for similar compliance failures 1.
Upbit also faced a 35.2 billion won fine plus other sanctions. Separate reporting said Dunamu’s CEO Lee Sirgoo got a reprimand, while other executives and employees faced discipline 2, 1.
Korbit received a smaller 2.73 billion won fine plus an institutional warning tied to anti-money laundering (AML) lapses. Reports did not include a business suspension in Korbit’s penalty 3.

Bithumb’s recent error exposed internal-control gaps and drew scrutiny from lawmakers

Bithumb mistakenly credited 620,000 bitcoin inside its internal system. Korea Times reporting said Bithumb’s actual bitcoin holdings were estimated at fewer than 50,000, including about 42,619 held by customers and 175 on Bithumb’s own books as of Q3 4.
The system failed to block a transaction that exceeded Bithumb’s holdings, which raised questions about internal controls 4.
Lawmakers then criticized financial regulators for missing structural weaknesses despite multiple reviews and inspections since 2022 5.
Authorities set up an emergency task force with the Financial Services Commission (FSC), the Financial Intelligence Unit (FIU), the Financial Supervisory Service (FSS), and the Digital Asset Exchange Alliance (DAXA, a self-regulatory group of South Korea’s major crypto exchanges). Separate reporting said the group is checking asset verification and internal controls at other major exchanges, with findings expected to shape DAXA rules plus future crypto legislation 4, 6.