South Korean exchange UpBit is still reeling from its hack in November which cost them 342,000 ETH valued at approximately $50 million at the time, and its users are the ones suffering.

A Jinse report has found that many Chinese customers are finding it difficult to withdraw Korean Won since December, with the exchange banning all foreigner withdrawals even with up to date Know Your Customer (KYC) details.

The reasoning behind this may not have anything to do with the hack in November, rather the catalyst was the Bithumb tax scandal. In December last year, the South Korean exchange was fined by the National Tax Service (NTS), with the organization withholding tax worth 80.3 billion won, or $70 million. 

In response to fears that they too may fall foul of these new regulations, UpBit, decided to hold all transactions for foreigners after reports claimed this was a determining factor in the huge tax bill handed to Bithumb. According to the Jinse report, UpBit explained the reasoning behind their decision and looked to calm their worried foreign customers by saying:

“We are strengthening KYC management in response to FATF’s proposal…After hearing reports about Bithumb taxation at the end of December, we also started to check the possibility of taxation internally. Since then, foreign customers who have added KYC cannot cancel the withdrawal. In order to reduce the foreign customer’s Inconvenience, we are conducting research from all angles. We are doing our best to resolve the inconvenience of foreign customers as soon as possible. “

For now, it would seem that foreign users who are on Upbit must have to wait until a decision is made by the IRS in Korea. How long that will take is unknown, so the situation is rather bleak.

Not only that, but many activists in China and elsewhere that are looking to bring UpBit to account are concerned that the lack of regulation and cohesion makes their fight even more difficult. 

Others have pointed to the possibility that the current ban from withdrawing has nothing to do with tax but rather, UpBit is in serious financial bother. 

According to the Jinse report, “a lawyer close to UPbit said: UPbit representatives tried to use 20% of the withdrawal amount of foreign users as collateral for subsequent tax replenishment.”

Either way, it is an uncomfortable and worrying ait for the foreign users of UpBit. Let’s hope that this issue can be resolved swiftly.