Although the growing adoption of cryptocurrencies is widely discussed, the industry has also seen a sharp increase in scams, hacks, and other illicit activities.
On March 9, South Korea’s Financial Intelligence Unit (FIU) issued a preliminary notice to Bithumb, the country’s second-largest crypto exchange.
The notice warned of a possible partial suspension of activities for six months as well as possible sanctions against its CEO.
What is the main concern?
Although the six-month sentence has attracted attention, the greater concern lies in the reason behind it. Regulators say the exchange failed to properly comply with anti-money laundering (AML) obligations under the Special Financial Reporting Act.
The FIU’s concerns primarily focus on Bithumb’s dealings with unregistered foreign platforms and its failure to properly follow Know Your Customer (KYC) rules.
Regulators believe that by allowing transactions through unverified offshore entities, the exchange may have created a loophole that circumvents capital control measures set by law.
A sanctions review committee is expected to meet later this month to decide whether the six-month suspension will become permanent. However, its impact is already extending across the industry.
This update follows Bithumb’s recent “ghost coin” error, where a hardware error briefly credited users with approximately $40 billion worth of Bitcoin.
That prompted authorities to also examine other major exchanges such as Coinone and GOPAX — a sign that regulators are finally preparing for a broader crackdown.
Bithumb defends itself
In its defense, a Bithumb official said:
“This measure is not a final sanction, but rather a preliminary opinion, and there may be some adjustments when the sanctions are reviewed.”
The official further added:
“The restriction only applies to transfers (withdrawals) of virtual assets from new members.”
Not the first time…
This is not the first time that the South Korean FIU has taken strict action against major crypto exchanges.
In November 2025, Upbit operator Dunamu was fined 35.2 billion won and given a three-month partial suspension after regulators discovered more than 5 million cases of KYC violations.
Earlier this year, Korbit was also fined 2.73 billion won as well as given an official warning from authorities.
The proposed action against Bithumb shows that regulators are becoming stricter. The proposed six-month suspension is twice as long as the penalty imposed on Upbit.
However, these “partial” suspensions generally do not result in the cessation of operations. The restrictions mainly apply to new users, preventing them from transferring cryptocurrencies off the platform, while existing users can still trade normally.
On-chain activity worthy of attention
Here, it is worth noting that recent on-chain data revealed an interesting change in activity.
Source: CryptoQuant
In the past, Bithumb has often experienced large transfers of Bitcoin between exchanges, particularly during periods of market volatility in late 2025 and when Bitcoin fell by nearly $70,000 in early 2026.
These movements generally indicate a significant repositioning on the part of institutional investors.
However, due to the FIU’s possible sanctions approach, these flows have dropped sharply to just 15.9 BTC – a sign that traders are currently holding back.
This is why market participants are now suspending their activities pending the meeting of the sanctions review committee on March 16.
Final summary
- Although the proposed suspension will not completely stop trading, it could still slow the growth of the platform and affect investor confidence.
- Bitcoin’s declining trading flows suggest that traders and institutions are becoming cautious as regulatory uncertainty increases.
