Bithumb Halts USDT Market Amid South Korean Regulatory Scrutiny: A Deep Dive into the FIU Investigation and Its Implications

In a significant move reflecting the intense regulatory climate in South Korea, Bithumb, the country's second-largest cryptocurrency exchange, has abruptly shut down its USDT market and dissolved its order-book-sharing partnership with Australia's Stellar Exchange. The closure, which took effect at 11:00 AM KST on Friday, November 28, 2025, marks a dramatic end to a beta service that lasted just over two months. This decision comes directly on the heels of an extended on-site investigation by the Korea Financial Intelligence Unit (FIU), which began on October 1, 2025, and focused on potential vulnerabilities in anti-money laundering (AML) and Know Your Customer (KYC) protocols stemming from the cross-border collaboration.

The Regulatory Investigation That Triggered the Closure

The primary catalyst for Bithumb's strategic reversal was the initiation of a formal probe by the Korea Financial Intelligence Unit. The FIU's on-site investigation at Bithumb's premises, commencing on October 1, 2025, was notably extended, lasting much longer than is typical for such regulatory reviews. This prolonged scrutiny intensified operational and compliance pressure on the exchange.

The central focus of the FIU's probe was the order-book-sharing arrangement between Bithumb and Stellar Exchange. Regulators zeroed in on whether this technical integration could create loopholes in anti-money laundering protocols. Specifically, the investigation examined potential weaknesses in KYC procedures and compliance with the Travel Rule. The Travel Rule is a global regulatory requirement that mandates Virtual Asset Service Providers (VASPs) to collect and share detailed information about the sender and recipient for cryptocurrency transactions exceeding a certain threshold. South Korean regulators expressed concern that Bithumb’s partnership with an overseas exchange like Stellar Exchange could allow users to circumvent these strict domestic rules by routing transactions through a jurisdiction with potentially different compliance standards.

A Short-Lived Partnership with Stellar Exchange

The now-defunct partnership was launched with ambitious goals. On September 22, 2025, Bithumb announced the beta launch of its USDT market, highlighting its collaboration with Stellar Exchange to boost liquidity by sharing order books. This model, which pools trading volume from two separate platforms, was designed to provide users with deeper market access and more competitive pricing by creating a larger, combined liquidity pool.

However, complications arose swiftly. During the partnership, it was revealed that staff from BingX were working at Bithumb’s headquarters in Seoul. This detail raised immediate questions about oversight and regulatory jurisdiction, as Stellar Exchange is a subsidiary of BingX, a Singapore-based trading platform. This physical presence of a foreign entity's employees on South Korean soil likely amplified regulatory concerns about the practical enforcement of South Korea’s strict virtual asset laws. The situation underscores the complex compliance challenges that can emerge from cross-border partnerships, particularly in a nation like South Korea, which rigorously enforces the Act on the Protection of Virtual Asset Users.

Immediate Impact on Bithumb Users and Trading Pairs

For users of the platform, the closure has direct and concrete consequences. Bithumb confirmed that all outstanding orders in the USDT market were canceled upon closure. Furthermore, API services specifically related to the USDT market have been suspended. It is crucial to note that trading for the ten affected cryptocurrencies has not been completely halted; these assets continue to be available for trading against the Korean Won (KRW) on Bithumb's main platform. Deposit and withdrawal functions for these assets also remain operational, ensuring that user access to their funds is preserved despite the specific market closure.

In its official communication, Bithumb framed the decision as one aimed at providing "a more stable, advanced trading environment via system improvements." The exchange stated that it would provide updates regarding a potential reopening of the USDT market in the future but did not offer any specific timeline. However, industry observers and reports indicate that the shutdown was a direct response to regulatory demands from the FIU rather than a voluntary initiative for system upgrades.

Broader Context: South Korea's Evolving Crypto Regulatory Landscape

This event is not an isolated incident but rather a reflection of South Korea's maturing and increasingly stringent regulatory framework for digital assets. The country has positioned itself as a global leader in establishing comprehensive rules to govern the crypto industry, with a strong emphasis on investor protection and financial crime prevention. The full implementation of the Act on the Protection of Virtual Asset Users has empowered regulators like the Financial Services Commission (FSC) and the FIU with greater authority to monitor and enforce rules related to asset management, customer protection, and real-time transaction monitoring.

The swift action against Bithumb's USDT market demonstrates regulators' particular vigilance regarding international operations that could potentially undermine domestic controls. The case serves as a clear signal to all virtual asset service providers operating in South Korea that cross-border collaborations will be subjected to intense scrutiny, and any perceived weaknesses in AML or KYC enforcement will not be tolerated.

Strategic Conclusion: Navigating a Compliance-First Future

The closure of Bithumb's USDT market is a pivotal moment for the South Korean crypto industry. It highlights a critical tension between the inherently borderless nature of digital assets and the firmly established sovereignty of national financial regulations. For exchanges like Bithumb, ambitions for global expansion and enhanced liquidity must be carefully balanced against an uncompromising regulatory mandate for compliance.

For market participants and observers, this development underscores several key takeaways. First, regulatory risk remains a dominant factor for crypto businesses in key markets like South Korea. Second, partnerships with foreign entities, while attractive for liquidity and growth, introduce significant complexity and require robust, transparent compliance frameworks that satisfy domestic regulators.

Moving forward, readers and industry stakeholders should monitor several key developments:

• Formal Outcomes of the FIU Investigation: Any official findings or penalties issued by the Financial Intelligence Unit will set a precedent for how similar cross-border arrangements are treated.
• Bithumb's Next Moves: Whether and how Bithumb attempts to relaunch a USDT or other stablecoin market under a revised model that satisfies regulatory concerns.
• Industry-Wide Ripple Effects: Other South Korean exchanges will likely re-evaluate their own international partnerships and product offerings in light of this event, potentially leading to a broader industry pullback from similar cross-border integrations until clearer guidelines are established.

The Bithumb case ultimately illustrates that in jurisdictions with advanced regulatory regimes, innovation must be pursued hand-in-hand with compliance. As the global crypto landscape continues to evolve, the ability of exchanges to navigate these complex regulatory waters will be just as important as their technological capabilities.