South Korean cryptocurrency exchange Bithumb has been issued a preliminary notice of sanctions that could result in a six-month partial suspension of certain business activities. The notice was issued by the Financial Intelligence Unit (FIU) of the Financial Services Commission, the regulator responsible for enforcing anti-money laundering (AML) compliance for virtual asset service providers under the Act on Reporting and Using Specified Financial Transaction Information.

According to the FIU, Bithumb continued to transact with overseas virtual asset businesses that were not registered in South Korea and failed to adequately implement required Know Your Customer (KYC) procedures. As a result, the regulator has proposed a six-month partial suspension and disciplinary measures against the exchange’s chief executive.

The proposed restrictions would apply only to virtual asset transfers initiated by newly registered users. Existing customers would retain the ability to deposit and withdraw Korean won and cryptocurrencies, as well as continue trading on the platform.

The FIU emphasized that the sanction is not yet final. A review process will follow, with a sanctions deliberation committee scheduled to meet later this month to determine the final outcome.

Founded in 2014, Bithumb is among South Korea’s largest cryptocurrency exchanges, ranking second in domestic trading volume behind Upbit, according to CoinGecko. Alongside Coinone and Korbit, these exchanges account for the majority of trading activity among registered platforms in the country.

The proposed sanctions come shortly after an incident last month in which Bithumb mistakenly distributed billions of dollars worth of bitcoin to users, prompting heightened scrutiny from South Korea’s financial authorities. The case underscores the ongoing tightening of regulatory oversight across the country’s digital asset sector