Bithumb, South Korea's second-largest cryptocurrency exchange, has shut down its USDT market following a regulatory investigation into anti-money laundering controls. The closure terminated a two-month partnership with Australia's Stellar Exchange that involved order-book sharing across 10 cryptocurrencies.
What Happened: Regulatory Scrutiny
The Korea Financial Intelligence Unit (FIU) launched an on-site investigation at Bithumb on Oct. 1, examining whether the exchange's order-book sharing arrangement created vulnerabilities in anti-money laundering protocols. Investigators focused on potential weaknesses in Know Your Customer procedures and Travel Rule compliance, particularly regarding partnerships with overseas exchanges that may not meet South Korean regulatory standards.
The Travel Rule requires Virtual Asset Service Providers to collect and share sender and recipient information for certain crypto transactions.
Industry sources indicated the investigation extended beyond typical review periods, creating sustained operational pressure on the exchange. During the probe, regulators discovered that BingX staff—Stellar Exchange operates as a BingX subsidiary based in Singapore—worked at Bithumb's Seoul headquarters, raising questions about regulatory oversight and jurisdictional boundaries.
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Why It Matters: Compliance Challenges
South Korea enforces the Act on the Protection of Virtual Asset Users, with the Financial Services Commission maintaining strict requirements for asset management, customer protection and transaction monitoring.
Authorities expressed concern that cross-border partnerships involving foreign firms operating on Korean soil present complex compliance challenges, particularly for anti-money laundering and KYC enforcement. The shutdown demonstrates the operational risks exchanges face when expanding internationally in jurisdictions with rigorous oversight frameworks that prioritize investor protection and crime prevention.
Bithumb announced its USDT market beta on Sept. 22, partnering with Stellar Exchange to increase liquidity through shared order books.
The arrangement pooled trading volume to provide users with deeper market access. All outstanding USDT market orders will be canceled at closure, and API services related to the market will be suspended, though the 10 affected cryptocurrencies remain tradable in Korean Won.
In its official notice, Bithumb stated the closure aimed to provide "a more stable, advanced trading environment via system improvements," without providing a timeline for potential reopening. Observers interpret the shutdown as a direct response to regulatory demands rather than voluntary system upgrades, with FIU concerns over anti-money laundering controls driving the decision.
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