Court Halts Bithumb’s Six-Month Business Suspension

A Seoul court delivered a significant ruling on Thursday, siding with Bithumb by temporarily suspending a six-month partial business restriction imposed by regulators. This decision allows the prominent South Korean crypto exchange to maintain full operations while awaiting a final judgment in the ongoing legal dispute.

The Seoul Administrative Court confirmed its acceptance of Bithumb’s plea to halt the partial business suspension. This measure was originally levied by the Financial Intelligence Unit (FIU), the nation’s anti-money laundering (AML) authority operating under the Financial Services Commission.

“We are committed to diligently presenting our case throughout the remainder of the legal proceedings,” Bithumb stated following the favorable ruling.

In March, the FIU had imposed the suspension along with a substantial fine of 36.8 billion won. The regulatory body cited Bithumb’s failure to adequately verify user identities in approximately 6.65 million instances. Identified violations included the inability to block transactions involving unregistered virtual asset operators, a lack of compliance with essential customer verification requirements, and insufficient enforcement of transaction restrictions.

The proposed partial suspension would have significantly impacted Bithumb, specifically by preventing new customers from transferring external virtual assets. This would have represented the most severe sanction ever directed at a won-based cryptocurrency exchange in Korea.

Originally slated to commence on March 27, the sanction was put on hold after Bithumb initiated an administrative lawsuit and sought an injunction on March 23, effectively delaying enforcement until Thursday’s court decision.

This case is part of a larger trend, as the FIU has, since early last year, issued heavy penalties against South Korea’s largest won-based crypto exchanges. These include Dunamu, the operator of Upbit, along with Bithumb, Coinone, and Korbit, all cited for violations of the Special Financial Transactions Act. With the exception of Korbit, all these exchanges have filed administrative lawsuits challenging these sanctions, collectively raising fundamental questions about the FIU’s regulatory enforcement framework.

During a hearing on April 23, Bithumb argued that the suspension would severely disrupt new customer acquisition and inflict significant harm on its business, with potential for even greater impact should the institutional investor market expand. Conversely, the FIU contended that the measure would only affect a limited segment of trading activities, thereby having a minimal impact on the exchange’s overall revenue.

Bithumb is also anticipated to contest the hefty fine. Despite the FIU offering a 20 percent reduction for prompt payment, the exchange has yet to settle the penalty, more than four weeks after the deadline passed.

Thursday’s ruling was largely expected, drawing parallels to a similar case involving Dunamu. Dunamu secured a first-instance administrative ruling on April 9, with the court emphasizing that an operator’s proactive compliance efforts should be taken into account, especially in the absence of clear regulatory guidelines. The FIU has since appealed the Dunamu decision.

Meanwhile, Coinone faced a 5.2 billion won fine and a partial suspension due to Know Your Customer (KYC) violations. Its sanctions are also currently under a temporary stay, with its initial hearing scheduled for May 12.

The FIU has previously stated that sanction levels varied based on the effectiveness of exchanges in blocking transactions with unregistered operators. This latest court ruling is likely to intensify scrutiny and further questions regarding the precise legal basis and consistency of the FIU’s approach to crypto exchange sanctions.