The result of the administrative lawsuit filed by Dunamu, the operator of the virtual asset exchange Upbit, against the Financial Intelligence Unit (FIU) will be decided this week. In particular, the sanctions against Upbit are drawing attention in the industry because the Upbit case could influence the severity of sanctions against other virtual asset exchanges.
According to the virtual asset industry on the 25th, the result of the temporary injunction administrative lawsuit filed by Dunamu against the FIU at the Seoul Administrative Court will be announced this week. Previously, the court conducted a related closed hearing on the 13th, following Dunamu's administrative lawsuit, and received additional written submissions until the 20th. Following the administrative lawsuit, the effectiveness of the partial suspension of operations imposed by the FIU on Upbit last month has been temporarily halted until the 27th.
On the 25th of last month, the FIU imposed sanctions on Upbit, including a three-month partial suspension of operations from the 7th to June 6 and a warning against the CEO for violating the Specific Financial Transaction Act. In connection with this, the FIU is also discussing the scale of fines to be imposed on Upbit. However, Dunamu has determined that it is difficult to accept the sanctions and requested the cancellation of the partial suspension and the temporary injunction at the Seoul Administrative Court on the 27th of last month for the main lawsuit.
During the hearing, Dunamu emphasized the urgency of the temporary injunction for the main lawsuit. On the other hand, the FIU reiterated that the disposition was appropriate and expects more disputes to arise in the main lawsuit. The intent of the Specific Financial Transaction Act is to prevent money laundering, and since this is an internationally agreed matter, the FIU's action to prevent fraudulent transactions using virtual assets was justified.
The industry is keenly observing the outcome of the administrative lawsuit against Upbit. Starting with Upbit, the five major Korean won transaction exchanges are facing the renewal of their virtual asset service provider (VASP) status from the FIU this year, as four of them, excluding Gopax, have been found to have the same violations of the Specific Financial Transaction Act as Upbit. In particular, Bithumb has been accused of transferring more than 60 million virtual assets (about 22.4 billion won) to exchanges that did not receive approval from financial authorities. If evaluated on the same criteria as Upbit, the remaining exchanges are also unlikely to evade severe penalties.
However, there are analyses suggesting that the FIU's penalties against Upbit may not be very effective. A warning against financial company executives is a severe penalty by financial authorities, and according to the Financial Company Governance Act, executives who receive such penalties cannot serve as executives of financial companies for three years; however, Dunamu is a virtual asset operator and is not subject to such regulations. The suspension of operations sanctions are also aimed at new registrants, which means that the transfer of virtual assets by new registrants to other exchanges is restricted, but transactions within the Upbit exchange are unaffected.
If the court lends support to Dunamu's position, the effectiveness of the FIU's sanctions will be suspended until the result of the main lawsuit disputing the legitimacy of the partial suspension of operations is revealed. However, if the court does not announce the decision on the temporary injunction administrative lawsuit by the 27th, new customers at Upbit will not be able to use virtual asset deposits and withdrawals starting at midnight on the 28th. A Dunamu official said, "We have clarified the facts in the hearing and will continue to follow the established procedures."