Upbit may face penalties for alleged South Korean financial regulation violations.

Upbit, South Korea’s largest crypto exchange, may face sanctions from the nation’s Financial Services Commission for allegedly failing to comply with know-your-customer (KYC) and anti-money laundering rules.

Last week, the platform received a procedural sanctions notice from the FSC’s Financial Information Analysis Institute, according to local media outlet Maeil.

Upbit must submit a formal argument against the sanction by Jan. 20. The FIU will then review the submitted response and issue a final decision on the matter.

If the sanction is upheld, new users on Upbit could be prohibited from withdrawing assets from the exchange for up to six months. Additionally, the platform’s crypto license renewal was suspended last year pending the outcome of an ongoing investigation.

The potential penalty is part of a broader effort by South Korean authorities to combat regulatory noncompliance in the wake of Terra’s $60 billion ecosystem collapse in 2022. Following Terra’s implosion, the FSC ramped up its scrutiny of crypto exchanges and digital asset operators.

South Korea also plans to draft new cryptocurrency regulations by the end of 2025 as part of its efforts to standardize the local digital asset economy. The initiative aims to strike a balance between protecting consumers and supporting businesses.

Part of that plan includes easing restrictions on institutional crypto trading and possibly issuing real-name accounts to experienced players.