New financial guideline aims to protect investors and bring order to digital asset lending
South Korea’s financial regulators have introduced sweeping restrictions on cryptocurrency lending services, marking one of the strongest moves yet to safeguard retail investors in the country’s rapidly growing digital asset market.
Investor Protection at the Core
The Financial Services Commission (FSC) announced that crypto lending platforms will now face strict boundaries. The new rules prohibit leveraged loans that exceed collateral value and enforce a hard cap of 20% annual interest rates on lending products.
In a statement, the FSC said the guideline “clearly defines the scope of virtual asset lending services by referring to global practices, while putting user protection at the forefront.”
To further reduce risks, companies must rely on their own capital for lending operations and cannot bypass restrictions by using third-party arrangements.
Limits on Eligible Cryptocurrencies
The guideline narrows the field of available lending assets. Only the top 20 cryptocurrencies by market capitalization are permitted, or those listed on at least three licensed domestic exchanges.
If a token is flagged as “cautionary” by exchanges, all lending activity for that asset must be suspended immediately.
The FSC has also introduced requirements for risk management. Borrowing limits will depend on a user’s experience and transaction history, and platforms must issue advance warnings if customers face liquidation risk.
“These measures are designed to reduce sudden financial shocks for individual investors,” an industry analyst noted, highlighting that the guidelines aim to balance innovation with stability.
Implementation and Market Impact
The rules are effective immediately and will be monitored by the Digital Asset Exchange Alliance (DAXA). The FSC signaled plans to later formalize the framework into law after evaluating its impact.
By restricting high-risk lending and curbing excessive interest rates, South Korea is setting a precedent for tighter oversight in Asia’s crypto markets. Regulators believe these changes will strengthen trust and provide a safer environment for investors in the long term.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.