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Upbit demands Know Your Customer (KYC) process for foreigners to withdraw, China’s response?

Local cryptocurrency exchange Upbit started suspending withdrawals from foreigners’ accounts in December last year. Many in the industry were perplexed with the measure, as it came unexpectedly and without specific explanations. Upbit later promised that it will start relaxing the measure for foreigners who completed the Know your Customer (KYC) process. Still, many foreign users continue to report difficulties, as the verification process is complex and completion of the KYC process is required repeatedly, even after registration. Chinese media reports on Upbit’s restriction on foreigners’ withdrawals Jin Se Cai Jing, a cryptocurrency media outlet in China, reported last week that many Chinese users are having difficulties using Upbit services from the cryptocurrency exchange, with cash withdrawals limited for all non-Korean users. The outlet reported that Upbit was again demanding KYC procedures for foreigners, even though they were already completed when registering for service at the exchange. The outlet expressed confusion to find Upbit blocking foreigners’ withdrawals without prior notice. “Although this is fairly common in the coin market, it is surprising that the famous cryptocurrency exchange Upbit in Korea, the third-largest cryptocurrency market in the world, suddenly implemented such measures,” Jin Se Cai Jing reported. Upbit demands KYC procedures when Chinese users ask for withdrawals According to the publication, Chinese users found out in mid-December that all cryptocurrency assets and cash deposits were blocked from withdrawal. A Chinese Upbit customer said that the company’s customer service center demanded KYC verification procedures when asked for withdrawal. “I already went through the KYC verification when signing up for Upbit in 2017, [and] I don’t know why I have to do this all over again,” he said, according to the publication. Upbit then responded that the KYC process is a company policy intended to strengthen security, and that withdrawals can’t be processed if without KYC verification materials. But even after KYC verification is complete, lifting the withdrawal suspension could take additional days. “Upbit said I could make withdrawals two weeks after the KYC process, but the situation is the same even after a full month,” another Chinese user of Upbit told the Chinese publication. Lack of cash deposit after stolen Ethereum? Then why did Upbit stop foreigners from making withdrawals? The publication pointed to the Nov. 27 Ethereum theft case. The amount lost in the theft was recovered with Upbit’s own assets, and the Chinese publication argued that the incident has prompted renewed demands for KYC verification. It suggested that Upbit blocked foreigners’ accounts after it lost substantial funds while recovering from the theft. “Many of the users are questioning Upbit’s financial stability after the Ethereum incident,” the publication contended. “For that reason, some believe that Upbit is trying to buy time by requiring foreigners to submit KYC verification materials.” Taxation problem for foreigners? Bithumb’s taxation of foreigners also prompted questions. Bithumb said in a Dec. 27 regulatory filing that the National Tax Service levied a total of 80.3 billon won ($68.2 million) in taxes for income of non-local residents, or foreign customers. The Chinese publication cited Coin Desk Korea’s article and suggested that Upbit’s tax demands from the National Tax Service may have been similar to those of Bithumb. “It is interesting that Upbit started limiting foreigners’ withdrawals after the National Tax Service levied a sum to Bithumb,” the publication said. “It isn’t easy to comprehend why Upbit is blocking foreigners’ withdrawals, how it is conducting the KYC verification and who are the ones that it deems [eligible] for relaxation for the limit.” The publication also pointed to the case of how Dunamu founder and CEO Song Chi-hyung was indicted on the charge of illegally taking 150 billion won by making fake accounts on Upbit. Upbit: ‘Those are unrelated … the reason is change in the regulatory sphere’ But Upbit has a different response. Upbit told JoinD in an interview Tuesday that the Ethereum theft case and Bithumb’s foreigner taxation issue are unrelated to the recent incident. The exchange responded that it has strengthened the KYC conditions as a preemptive response ahead of possible new legislation, and to follow the suggestions of the Financial Action Task Force.

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