South Korea's Regulatory Hammer Falls on Coinone: $3.5M Fine and Business Suspension

South Korea's Financial Intelligence Unit (FIU) has leveled significant penalties against Coinone, the nation's third-largest crypto exchange, marking the second major regulatory blow to the country's trading infrastructure in as many months.

The FIU, operating under the Financial Services Commission, accused Coinone of systematic anti-money laundering (AML) failures that exposed the exchange to substantial compliance risks. According to The Korea Times, Chosun, and Yonhap News reports, the violations span multiple categories—the most egregious being a failure to verify user identities across approximately 70,000 customer accounts.

The Compliance Breakdown

Beyond identity verification lapses, Coinone allegedly facilitated over 10,000 transactions with 16 foreign exchanges that lack registration with South Korean regulators. What makes this particularly damaging: the FIU claims it issued repeated warnings that Coinone ignored.

The exchange also violated customer due diligence obligations by marking verification as complete while critical information remained missing. Transactions continued for customers whose verification processes hadn't been finalized—a red flag for potential money laundering activity.

Penalties Take Shape

The FIU handed down a 5.2 billion won ($3.5 million) fine and imposed a three-month partial business suspension. During this period, Coinone cannot accept new customer deposits or process withdrawals, effectively cutting off a revenue stream while damaging user confidence. CEO Cha Myung-hoon received an official administrative reprimand—not a criminal charge, but a public black mark nonetheless.

Coinone has 10 days to file a dispute before penalties become final, though the FIU's enforcement track record suggests appeals face uphill battles.

Pattern of Pressure

This enforcement action represents the second major crackdown in a month. Bithumb, South Korea's second-largest exchange by volume, faced a $24 million fine and six-month partial suspension in March for identical AML failures. That incident followed Bithumb's catastrophic error sending customers 620,000 BTC (roughly $42 billion at the time) instead of 620,000 Korean won—a mistake that embarrassed regulators and prompted the Bank of Korea to escalate oversight demands.

The central bank responded by calling for stricter controls, including potential trading suspensions triggered by unusual activity or sudden price volatility. Lawmakers are considering these proposals as part of a broader crypto regulation tightening.