South Korea's Systematic Crypto AML Crackdown: Exchanges Face Uniform Penalties

South Korea's Financial Intelligence Unit (FIU) is escalating its regulatory grip on the cryptocurrency sector, preparing sanctions against major exchanges for anti-money laundering (AML) and Know Your Customer (KYC) violations. The enforcement actions, which follow a year-long inspection process, target platforms including Upbit, Bithumb, Coinone, Korbit, and GOPAX. The FIU has already penalized Dunamu, the operator of Upbit, with a 35.2 billion won fine and a three-month suspension of key services, setting a precedent for upcoming penalties.

The regulatory crackdown adheres to a "first-in, first-out" approach, with inspections conducted in chronological order. Dunamu was the first to face sanctions after an August 2024 review, followed by Korbit (October 2024), GOPAX (December 2024), Bithumb (March 2025), and Coinone (April 2025). Korbit and GOPAX are now expected to receive penalties next, with Bithumb potentially delayed due to an additional inspection of its order book operations. Industry analysts suggest the violations across exchanges are largely consistent, with fines and operational restrictions likely mirroring Dunamu's case.

The FIU's actions reflect a broader push to tighten AML compliance in South Korea's crypto market. Inspections focused on KYC protocols, suspicious transaction reporting, and adherence to the Special Financial Transactions Act. Regulators emphasized a uniform application of penalties, ensuring that all exchanges face similar scrutiny regardless of their market share. The enforcement timeline, however, has been extended beyond initial expectations. While most sanctions were projected to conclude by mid-2025, the process now stretches into the first half of 2026, with Bithumb's case possibly trailing further due to ongoing investigations.

The sanctions underscore South Korea's position as a global leader in crypto regulation. The country has long maintained stringent AML rules, but this latest campaign signals an intensified focus on compliance. The FIU's actions align with a broader regulatory agenda, including a delayed crypto tax regime slated for 2027, which has created uncertainty in the market. Meanwhile, the enforcement measures have drawn comparisons to the Federal Reserve's recent rate-cut volatility, as both highlight macroeconomic and regulatory shifts impacting investor sentiment.

The exchanges under scrutiny now face a challenging landscape. For instance, Bithumb's additional inspection has raised questions about its ability to meet compliance benchmarks, while Coinone's penalties are expected to follow swiftly once legal reviews conclude. The sector-wide approach by the FIU suggests a long-term strategy to stabilize the crypto market while balancing innovation and oversight.