In early May 2025, South Korea’s two largest cryptocurrency exchanges—UPbit and Bithumb—came under intense public scrutiny and criticism from local market participants. While both platforms play a dominant role in the nation’s digital asset ecosystem, recent developments have sparked concerns over transparency, regulatory compliance, and investor protection.
This article explores the origins of the controversy, examines the responses from both exchanges, and analyzes how these incidents reflect broader challenges within South Korea’s rapidly evolving crypto landscape.
UPbit Under Investigation: No Violations Found
On May 13, 2018, BTCManager reported that South Korean authorities—including law enforcement, the Korea Financial Intelligence Unit (KoFIU), and the Financial Services Commission (FSC)—had launched an official investigation into UPbit. At the time, the exchange issued a public statement emphasizing its full cooperation with regulators:
“UPbit is currently under investigation by prosecutors, and we are making every effort to cooperate. All trading and withdrawal services remain operational, and your assets are securely stored in your accounts. You can continue using UPbit with confidence.”
Despite the initial raid and data seizure, no formal charges or violations were ever disclosed by Korean authorities. In South Korea, it is standard practice not to release official reports when investigations conclude without evidence of wrongdoing. As such, the absence of a public report did not imply guilt but rather suggested that no illegal activities were substantiated.
Industry insiders later clarified that the probe stemmed from misunderstandings about UPbit’s technical infrastructure—specifically, its support for dozens of cryptocurrencies without integrated native wallets for each. This meant users could trade certain tokens on the platform but couldn't directly deposit or withdraw them. While this operational model is common among centralized exchanges for security and scalability reasons, it led to confusion among retail investors about fund control and liquidity.
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With no findings of misconduct and services continuing uninterrupted, market anxiety eventually subsided. The incident highlighted the need for clearer communication between exchanges and users regarding technical limitations and custody models.
Bithumb’s Popchain Controversy Sparks Backlash
While UPbit weathered its investigation, attention soon shifted to Bithumb amid growing backlash over its involvement with a controversial token called Popchain.
Bithumb had promoted Popchain through an airdrop campaign ahead of its planned listing in May 2018. Marketed as a utility token tied to Pop TV—a video-sharing platform claiming millions of active users—Popchain aimed to leverage user engagement to generate network value.
However, the project quickly unraveled when developers and analysts discovered that Popchain’s open-source code appeared to be largely copied from established cryptocurrencies like Dash, Monero, and Bitcoin. More troubling was the fact that core identifiers from these original blockchains had not even been removed—a red flag indicating minimal development effort and potential deception.
Investor frustration intensified upon learning that the team behind Popchain was also responsible for Bithumb Cash, an ERC-20 token previously abandoned due to regulatory hurdles. Many viewed the Popchain launch as an indirect attempt to revive a shelved project under a new name, bypassing proper due diligence.
In response, Bithumb faced mounting pressure to delist the token. The exchange acknowledged the reputational damage caused by misinformation and stated:
“The Bithumb team recognizes that the release of inaccurate information regarding Popchain has caused concern among investors. We will monitor Popchain’s performance on other major cryptocurrency platforms before making any final decisions about its listing status.”
Ultimately, Bithumb distanced itself from direct responsibility for Popchain’s development but faced criticism for inadequate vetting processes—a reminder that exchange endorsements carry significant weight in shaping market perception.
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Market Implications: Trust and Stability at Stake
The combined controversies surrounding UPbit and Bithumb shook investor confidence in South Korea’s domestic crypto market. As gatekeepers of billions in digital assets, both exchanges are central to local trading activity, often referred to as the “Kimchi premium” market due to price discrepancies between Korean and global rates.
When trust in these platforms wavers, so does market stability. Retail investors began questioning whether sufficient oversight exists to prevent reckless listings or opaque operations. These concerns were amplified by fears of regulatory crackdowns, especially during a period of heightened global scrutiny over ICOs and exchange practices.
Nevertheless, both exchanges survived the storm by maintaining operational continuity and reinforcing their compliance frameworks. Over time, they implemented stricter token review procedures, enhanced wallet security measures, and improved transparency in communications—steps that helped restore credibility.
Core Keywords and SEO Integration
This analysis centers around several core keywords critical to understanding the dynamics of cryptocurrency exchanges in regulated markets:
- Cryptocurrency exchange
- UPbit
- Bithumb
- Regulatory investigation
- Token listing
- Market stability
- Investor protection
- Blockchain transparency
These terms naturally appear throughout the narrative, ensuring relevance for users searching for insights into South Korea’s crypto ecosystem, exchange governance, or historical controversies affecting digital asset platforms.
Frequently Asked Questions
What triggered the investigation into UPbit?
The probe into UPbit was initiated due to concerns about liquidity and wallet integration for supported cryptocurrencies. Authorities sought to verify whether user funds were properly secured and whether trading practices adhered to financial regulations.
Did UPbit violate any laws?
No violations were found during the investigation. Korean authorities typically do not issue formal reports when no wrongdoing is detected, which aligns with standard legal procedure.
Why was Popchain controversial?
Popchain faced backlash because its source code closely resembled that of Dash, Monero, and Bitcoin—with key identifiers left unchanged. This raised serious doubts about its originality and development integrity.
Was Bithumb directly responsible for creating Popchain?
No. While the developers behind Popchain were linked to another project associated with Bithumb (Bithumb Cash), Bithumb itself did not create Popchain. However, it faced criticism for promoting and planning to list the token without thorough vetting.
How did these events affect South Korea’s crypto market?
They temporarily eroded investor trust and highlighted systemic risks related to token listings and exchange accountability. In response, both exchanges strengthened compliance protocols, contributing to long-term market maturation.
Are UPbit and Bithumb still operating today?
Yes. Both exchanges remain active and continue to serve as major players in South Korea’s cryptocurrency trading landscape, having adapted to stricter regulatory expectations.
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Conclusion
The 2018 scrutiny of UPbit and Bithumb serves as a pivotal case study in the evolution of cryptocurrency regulation in South Korea. While neither exchange was found guilty of illegal activity, both incidents underscored the importance of transparency, rigorous due diligence, and proactive communication with users.
As digital asset markets mature globally, exchanges must not only comply with regulations but also earn ongoing trust through ethical practices. The lessons from this chapter in Korea’s crypto history remain relevant—for investors, regulators, and platforms alike—as the industry moves toward greater accountability and sustainability.