Min Byung-deok, a member of the Democratic Party of Korea, is calling for stringent penalties, stating that fines of up to 183 trillion won could be imposed on Dunamu, the operator of the domestic virtual asset exchange Upbit. A total of 9.57 million legal violations have been detected, and it has been claimed that fines of 30 million to 100 million won need to be paid for each violation under current law. The Financial Intelligence Unit (FIU) of the Financial Services Commission is expected to hold a sanctions review committee to discuss the level of fines. The FIU had previously issued a three-month partial suspension of operations against Dunamu, but Dunamu has filed an administrative lawsuit and received a decision to suspend the execution.
The parties waiting anxiously for the results of this sanctions review committee are not limited to Dunamu alone. Small and medium-sized exchanges awaiting sanctions due to similar legal violations are also on edge. This is because the level of fines imposed on Dunamu could set a standard for sanctions against other exchanges.
In fact, Dunamu would not face significant issues as long as unusual circumstances requiring astronomical fines do not arise. In the first quarter of this year, Dunamu's liquid assets exceeded 8 trillion won, and even excluding member deposits of 5.5 trillion won, 2.5 trillion won remains. It can comfortably cover not just hundreds of millions but even billions of won. Dunamu recorded a net profit of 320.5 billion won in the first quarter, with projections suggesting it will exceed 1 trillion won in net profit for the year.
For this reason, Dunamu would prefer to pay more fines than to receive a suspension of operations. Dunamu's top priority is its expansion into overseas markets. There are reports that discussions about pursuing an initial public offering (IPO) in the U.S. market are underway internally at Dunamu. However, a record of receiving a partial operational suspension from financial authorities could pose a significant obstacle. For this reason, it is reported that Dunamu has negotiated with the financial authorities to pay more fines instead of receiving a partial operational suspension.
In contrast, small and medium-sized exchanges, excluding the second-largest virtual asset exchange Bithumb, are burdened even by fines due to accumulated performance deterioration. If Dunamu is subjected to massive fines, it increases the likelihood that other exchanges, which have also been found to have committed similar legal violations, will have to pay more fines than expected. There is also no guarantee that the financial authorities will lower the level of fines considering the circumstances of the companies.
In the virtual asset industry, particularly Coinone is expected to suffer significant damage. Although the level of legal violations by Coinone has not been disclosed, it is known that the trading volume with unreported virtual asset operators is considerable in relation to the size of the company. As of the end of last year, Coinone's cash-like assets amounted to 254.5 billion won, of which 244.4 billion won are member deposits. The cash available for the company is estimated to be around 10 billion won.
So at what level will the fines be set? Member Min has stated that the violation of customer identification obligations by Dunamu amounts to 9 million cases, emphasizing the need for strong penalties. The virtual asset industry expects that the extent of violations related to anti-money laundering obligations will be the key to determining the fines. The Act on Reporting and Using Specified Financial Transaction Information prohibits transactions with unreported virtual asset operators overseas. The FIU claims that Dunamu has facilitated a total of 44,948 virtual asset transfer transactions with 19 unreported operators. It is expected that not only the trading volume but also the transaction scale will influence the calculation of fines.
An industry insider said, "It seems that the top two companies in the industry, Dunamu and Bithumb, can handle substantial fines without issues," adding that "small and medium-sized exchanges such as Coinone, Kakao, and Gopax are likely to face significant hits depending on the size of the fines." However, he noted, "It cannot be ruled out that the financial authorities might consider the situations of the companies when calculating the fines."
Dunamu has stated that there has been no confirmation of legal violations. The Seoul Administrative Court ruled in a provisional injunction lawsuit filed by Dunamu to halt the execution of a partial operational suspension that "a hearing on the lawfulness is necessary," ruling in favor of Dunamu. In reality, the administrative lawsuit over whether the results of the FIU's investigation constitute legal violations is still ongoing.