On May 31, 2018, South Korea’s largest cryptocurrency exchange Bithumb implemented one of the most aggressive anti-money laundering frameworks in the industry, blocking trading from 11 countries identified as high-risk jurisdictions. The move reflected both industry concerns about regulatory oversight and South Korea’s efforts to position itself as a responsible player in the global cryptocurrency ecosystem.
TL;DR
- Bithumb blocked trading from 11 NCCT (Non-Cooperative Countries and Territories) countries
- North Korea, Iran, Iraq, Sri Lanka, Serbia, Ethiopia, Syria, Trinidad and Tobago, Tunisia, Vanuatu, Yemen
- Korean Blockchain Association (KBA) spearheading broader self-regulation efforts among exchanges
>Bithumb’s trading volume reached ~$250.41 million in the 24 hours following the announcement
>Existing users from banned countries given 10-day transition period before full blocking
The Regulatory Context
South Korea had emerged as one of the world’s most active cryptocurrency markets by 2018, with exchanges handling billions in trading volume. However, the sector remained under intense scrutiny from regulators who had previously announced plans for strict oversight, including outright bans on anonymous trading and requirements for real-name bank accounts.
The FATF (Financial Action Task Force), an intergovernmental organization established by the G7 nations, had identified 11 countries as NCCT jurisdictions — regions with “insufficient policies and regulations to restrict money laundering and the utilization of various forms of money to finance illegal operations.” Bithumb’s decision to ban users from these countries directly responded to FATF recommendations while demonstrating the exchange’s commitment to regulatory compliance.
North Korea’s presence on the list was particularly significant, given the nation’s well-documented attempts to finance its nuclear weapons program through cryptocurrency theft. Reports had emerged in early 2018 that North Korean hackers were targeting South Korean exchanges, making Bithumb’s security measures both a defensive and compliance-driven necessity.
Bithumb’s Enforcement Measures
With a 24-hour trading volume of approximately $250.41 million that had overtaken Kakao-backed competitor Upbit’s $235.1 million, Bithumb wielded substantial market power. The exchange announced immediate blocking of new registrations from the 11 listed countries while giving existing users a 10-day transition period before their accounts would be fully restricted.
The enforcement mechanism went beyond simple blocking. Bithumb implemented stricter verification procedures for international users, requiring mobile-based identity verification that would make it significantly harder for individuals to circumvent geographic restrictions by falsifying residency information. The exchange stated this measure would “ensure users cannot deceive the platform by falsifying personal information and residential address starting from next month.”
Bithumb emphasized that the restrictions were part of a broader self-regulatory framework. “We will cooperate with the government and follow self-regulatory measures based on the policies introduced by the Korean Blockchain Association,” the exchange stated in their announcement. This positioning was crucial — by implementing measures proactively rather than waiting for government mandates, Bithumb aimed to demonstrate industry responsibility while potentially avoiding more restrictive regulatory interventions.
The Korean Blockchain Association’s Role
The KBA had been established to coordinate self-regulation among South Korea’s cryptocurrency exchanges. By May 2018, the organization had already developed comprehensive guidelines for security, transparency, and compliance. Bithumb’s measures aligned directly with the KBA’s broader mission of creating industry-wide standards that would preempt government regulation while addressing legitimate public concerns about money laundering and criminal activity.
Several factors drove the KBA’s formation. First, South Korean exchanges faced intense competition, creating pressure on security measures in pursuit of volume. Second, government officials had expressed concerns about the rapid growth of cryptocurrency trading, with some suggesting traditional stock market capitalization might be surpassed by crypto trading volumes. Third, international attention on North Korean cyber operations targeting exchanges added urgency to the regulatory imperative.
The KBA’s approach represented a delicate balance between innovation and responsibility. Rather than opposing regulation outright, the association sought to demonstrate that the industry could police itself effectively — a strategy that had shown mixed success in other jurisdictions but gained increasing acceptance as cryptocurrency markets matured.
Industry Implications
Bithumb’s announcement sent ripples through the global cryptocurrency exchange ecosystem. For smaller exchanges, the measures demonstrated a potential path toward regulatory compliance without complete capitulation to government demands. For larger players, the exchange’s actions created competitive pressure to implement similar measures lest they be perceived as lax on security.
The timing was particularly noteworthy. The move came just months before FATF was scheduled to release its updated guidance specifically targeting cryptocurrency transactions. Bithumb appeared to be getting ahead of potential international standards, potentially positioning South Korean exchanges as industry leaders in compliance rather than targets of regulatory enforcement.
International users who had grown accustomed to borderless access to cryptocurrency markets now faced increasingly fragmented access depending on their geographic location. This fragmentation would intensify throughout 2018 as exchanges worldwide began implementing region-specific restrictions, both for regulatory compliance and strategic market positioning.
Why This Matters
Bithumb’s sweeping AML measures marked a pivotal moment in cryptocurrency regulation. By implementing aggressive self-regulation while South Korea’s regulatory environment remained relatively favorable, the exchange demonstrated how industry players could shape regulatory outcomes through proactive compliance. The exchange’s 10.5 billion KRW ($9.6 million) money laundering fine in September 2018 would later validate the necessity of these measures, though the punishment for Coinrail hack victims underscored that even rigorous compliance couldn’t eliminate all risks.
More broadly, the case exemplified the cryptocurrency industry’s central dilemma: how to balance innovation with compliance when regulatory frameworks are still evolving. South Korea’s approach — encouraging self-regulation while maintaining the threat of enforcement — became a model that many jurisdictions would adopt, suggesting that cryptocurrency exchanges could achieve regulatory legitimacy without sacrificing the technical foundations that made blockchain technology revolutionary.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research before making investment decisions.
the 11 country list included Trinidad and Tobago. zero korean won trading volume came from there ever. pure optics for the financial regulators
gangnam_rpc_ True. Blocklist included Trinidad and Tobago – zero Korean won volume from there ever. Pure optics for regulators
250M in 24h volume while self reporting compliance. bithumb was simultaneously getting raided and maintaining top 5 global volume. 2018 korea was unhinged
$250M in 24h volume while self-reporting compliance. Sketchy OTC desks were the real business those days
$250M in 24h volume while blocking 11 countries. Bithumb was trying to have it both ways, look compliant while printing fees
kimchi_whale_ 11 countries blocked but the KBA had zero enforcement power. Korean regulators made examples of small exchanges while the big ones kept running sketchy OTC desks
the 11 country blocklist was performative compliance. none of those countries were major trading sources anyway. it cost them nothing to look cooperative
Park the blocklist was theater but it worked. regulators backed off for a few months which was the whole point. bought time for the real compliance work
the KBA self-regulation was window dressing. Korean exchanges got raided months later anyway
korean exchanges getting raided was inevitable. the KBA was created by the exchanges themselves, of course they were never going to enforce anything that hurt their own fees
bithumb got raided like 3 times and kept operating. the raids were political theater, nobody actually went to jail until much later
self regulation in crypto is always a joke. the KBA had no teeth, no audit powers, no enforcement mechanism. it was a PR shield plain and simple
Minjae is spot on. the KBA was founded by bithumb, korbit, coinone and upbit. expecting them to enforce against their own fee machines was fantasy
KBA was literally founded by the exchanges themselves. expecting them to enforce rules against their own members was always fantasy
the 11 country blocklist was interesting theater. north korea and iran were already blocked by banking rails. adding trinidad and tobago was pure optics
korean exchanges in 2018 were doing KYC with just a phone number and bank account. the AML stuff was reactive after regulators started making noise about shutting them down
KBA founded by exchanges themselves. Expected them to enforce against their own members? Fantasy. Self-regulation never works