South Korean regulators are turning up the pressure on major crypto exchange Bithumb following allegations of false advertising and botched promotional offers.
Key Takeaways
- South Korea’s Fair Trade Commission (FTC) raided Bithumb’s headquarters as part of an investigation into exaggerated liquidity claims made in 2025.
- The watchdog is also examining a failed promotional giveaway that left over 30,000 users without promised cash rewards.
- Dunamu, operator of top exchange Upbit, is under scrutiny for potentially blocking rivals from trading its unlisted stocks.
- Experts urge South Korea to rethink its aggressive stance and take a longer-term approach to crypto regulation.
What Happened?
Bithumb is being investigated by South Korea’s Fair Trade Commission over claims that it had the “highest liquidity” among domestic crypto exchanges. Regulators are also looking into a controversial promotional campaign run in 2025, where tens of thousands of users reportedly missed out on cash rewards due to mid-campaign rule changes. The investigation reflects a wider regulatory shift as authorities move to hold crypto firms to the same standards as traditional financial institutions.
Regulatory Spotlight on Bithumb and Dunamu
The FTC launched its probe on February 4, 2026, by sending two investigators to Bithumb’s headquarters in Seoul’s Gangnam District. This move follows months of scrutiny over Bithumb’s marketing materials from March and April 2025, which claimed the exchange had “the highest level of liquidity” in South Korea’s crypto sector.
However, data from CoinGecko tells a different story. Throughout 2025, Upbit, operated by Dunamu, held a commanding 68 percent share of local trading volume, while Bithumb trailed with 28 percent. The discrepancy raised red flags under South Korea’s Fair Labelling and Advertising Act, which prohibits misleading or exaggerated claims that could misinform consumers.
Alongside the liquidity issue, regulators are probing a promotional campaign Bithumb ran in late 2025. The exchange offered new users approximately $70 if they began using its API. After more than 50,000 people signed up, Bithumb reportedly altered the eligibility criteria during the event. This change allegedly disqualified around 30,000 participants from receiving their promised cash rewards.
Under the law, companies can be sanctioned for promotions that deceive or disappoint consumers, especially if terms are changed after participation begins.
Dunamu Also Under Scrutiny
Bithumb is not alone in facing regulatory heat. Dunamu, the operator of Upbit, is being examined for possibly restricting other platforms from trading its unlisted shares. Transactions of Dunamu’s stocks were allegedly only possible through its own Stockplus platform. This could be seen as a violation of South Korea’s fair trade laws, which prohibit companies from unfairly refusing transactions.
Why It Matters?
South Korea’s crypto exchanges are raking in massive profits but have largely escaped the strict oversight faced by banks and brokerages. In the third quarter of 2025:
- Dunamu posted 239 billion won (around $163 million) in net profit, a 308 percent increase year-over-year.
- Bithumb’s profits surged 3,285 percent, reaching 105.4 billion won.
Despite this growth, they are not yet classified as financial institutions, allowing them to operate in a regulatory grey zone. The government’s latest actions suggest a push to bridge that gap and regulate these “quasifinancial” firms more seriously.
Not everyone supports the crackdown. Kim Dae-jong, a professor at Sejong University, said, “Korea should pursue a longer-term approach rather than sticking to the long-held regulation-first stance.” He pointed to the United States, where crypto innovation is often embraced, including stablecoin issuance by big tech companies.
CoinLaw’s Takeaway
In my experience covering crypto regulation, this is one of the strongest signals yet that South Korean authorities are done letting crypto exchanges operate in a legal blind spot. When you look at the sheer scale of Bithumb’s and Upbit’s profits, it’s no surprise regulators are stepping in. But the way Bithumb allegedly mismanaged the giveaway campaign and made unverifiable liquidity claims shows how far the industry still needs to go in building consumer trust.
If South Korea wants to become a global player in the digital finance era, it needs balanced regulation, not just punishment. Get tough when needed, but also give room for innovation. Otherwise, exchanges might just take their ambitions elsewhere like Bithumb’s planned IPO in New York.
