South Korea Prepares Strict Crypto Lending Rules Amid Leverage Concerns
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South Korea’s financial regulators are preparing to issue new crypto lending guidelines in August, aiming to restrict high-risk leveraged products and improve investor safety. The move comes after local crypto exchanges like Upbit and Bithumb launched controversial lending services that allow users to borrow heavily against their digital assets.
The guidelines are expected to introduce limits on leverage, define user eligibility, and enforce strict risk disclosure protocols.
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) formed a joint task force this week to lead the initiative. The task force also includes representatives from DAXA (Digital Asset eXchange Alliance), a self-regulatory group made up of the five top South Korean exchanges: Upbit, Bithumb, Coinone, Korbit, and Gopax.
Up to 4x Leverage Raises Red Flags
According to Yonhap News Agency, Bithumb allowed users to borrow up to 4 times their collateral, while Upbit offered loans up to 80% of a user’s asset value. These high-leverage offerings sparked concerns over possible mass liquidations during volatile market swings, especially given the lack of formal oversight.
The absence of clear guidelines has exposed users to elevated risk, prompting the government to intervene.
The new framework will reportedly align with international crypto norms and also borrow elements from traditional stock market lending regulations. The objective is to create a more transparent and accountable lending environment within South Korea’s fast-growing digital asset ecosystem.
Guidelines to Cover Leverage Caps and Disclosures
The rules will likely include:
Leverage limits to cap overexposure
Asset and user eligibility criteria
Mandatory risk disclosures
Audit and reporting requirements for exchanges
In addition, regulators have instructed exchanges to review all lending products offering excessive leverage or unclear fiat-lending structures.
This regulatory push is seen as a cornerstone for future crypto legislation in South Korea.
Central Bank Expands Crypto Oversight
The crypto lending task force coincides with a separate move by the Bank of Korea, which is transforming its CBDC research division into a broader Virtual Asset Team. This new unit will help shape regulations around stablecoins and digital currencies, working alongside government bodies.
As stablecoin discussions heat up, South Korea’s banks and regulators are positioning themselves at the center of digital asset policymaking.
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.
