South Korea’s crackdown on crypto exchanges has hit a temporary pause after a Seoul court sided with Bithumb, granting the platform relief from a major regulatory penalty that could have disrupted its business.
On Thursday, the Seoul Administrative Court approved Bithumb’s request to suspend enforcement of a six-month partial business restriction imposed by the country’s Financial Intelligence Unit (FIU), an anti-money laundering authority under the Financial Services Commission. The ruling allows the exchange to continue normal operations while the broader legal dispute continues.
The FIU’s original sanction, announced in March, was one of the toughest ever issued against a Korean won-based crypto exchange. It included a 36.8 billion won (roughly $25–27 million) fine and operational restrictions that would have limited Bithumb’s ability to onboard new users.
The suspension targeted new customers, preventing them from transferring virtual assets to and from external wallets, an essential feature for any exchange competing in a global crypto market. Regulators argued the restriction was partial and would not cripple revenue, but Bithumb said it would severely damage growth and competitiveness.
The court appeared to agree with Bithumb, noting that even partial limits on deposits and withdrawals could hinder user acquisition and weaken the platform’s market position, particularly as South Korea prepares to open crypto markets further to institutional investors. The sanctions will remain on hold until a final court ruling.
At the center of the dispute are alleged violations of South Korea’s anti-money laundering and financial compliance rules. The FIU accused Bithumb of failing to properly verify user identities in approximately 6.65 million cases. These reportedly included:
- Inadequate Know Your Customer (KYC) checks
- Failure to block transactions involving unregistered crypto operators
- Weak enforcement of transaction monitoring and restrictions
Authorities said these lapses violated the country’s Special Financial Transactions Act, which governs how crypto platforms must operate to prevent illicit financial activity. Beyond the operational suspension, the regulator imposed a fine and launched disciplinary proceedings tied to company leadership.
Bithumb has strongly contested the regulator’s findings and the severity of the punishment. The company filed an administrative lawsuit on March 23, just days before the sanctions were due to take effect, and requested an injunction to delay enforcement. That legal move effectively froze the penalties, and Thursday’s ruling extends that protection until the court reaches a final decision.
“We plan to faithfully present our position throughout the remaining legal proceedings,” Bithumb said in a statement. The exchange has not yet paid the fine, despite being offered a 20% discount for early settlement, signaling that it intends to fully challenge the regulator’s actions.
Bithumb’s case is part of a wider regulatory push. South Korea has increased enforcement across its crypto sector over the past year, targeting major exchanges for similar compliance failures. Other leading platforms, including Upbit operator Dunamu and Coinone, have also faced penalties. Many have responded with legal challenges, raising questions about whether regulators are applying sanctions consistently.
The court’s temporary decision in favor of Bithumb could have wider implications for crypto regulation in South Korea. It highlights tension between regulators and exchanges over how AML rules are enforced. While authorities say strict oversight is needed to prevent financial crime, exchanges argue that unclear guidelines and heavy penalties risk stifling innovation and competition.
