Bithumb Halves Crypto Lending Leverage to 2x Amid Regulatory Scrutiny

Bithumb, South Korea’s major cryptocurrency exchange, has significantly revised its crypto lending parameters, halving the maximum leverage from 4x to 2x and reducing the maximum loan amount by 80%—from 1 billion won ($726,000) to 200 million won ($145,000) [1]. The adjustments follow a temporary suspension of the lending service on July 29 due to “insufficient lending volume,” according to a report by Kookmin Ilbo [1]. The exchange resumed the service on Monday after a review to address investor risk concerns and enhance service quality. The revised limits apply across the board, including to high-volume traders with over 100 billion won ($72 million) in cumulative trading activity in the past three years [1].

The decision reflects heightened regulatory scrutiny and the formation of a task force by South Korea’s Financial Services Commission (FSC) and Financial Supervisory Service (FSS) to develop “Virtual Asset Lending Service Guidelines.” The task force includes representatives from the Korea Institute of Finance and South Korea’s top exchanges, aiming to establish rules on leverage limits, asset eligibility, and risk transparency based on international standards and domestic market needs [1]. Regulators have also urged exchanges to reevaluate high-risk or legally ambiguous services, particularly those involving excessive leverage or fiat-backed crypto loans.

Bithumb reportedly coordinated with regulators before implementing the new lending terms [1]. This aligns with broader industry trends, where exchanges are adapting to evolving regulatory expectations and investor protection requirements. The move is seen as a response to growing concerns over the risks of leveraged lending in a market marked by volatility. By limiting leverage and loan sizes, Bithumb aims to reduce the likelihood of excessive risk-taking, a key issue in the crypto sector [1].

Analysts note that such adjustments could impact trading strategies reliant on leveraged positions and potentially affect overall liquidity and volume on the platform. The decision also highlights the ongoing challenge for exchanges to balance innovation with regulatory compliance. As crypto markets continue to evolve, Bithumb’s revised lending approach signals a more cautious stance, emphasizing stability and risk management in response to external pressures [1].

The broader South Korean market remains engaged with crypto, with over a quarter of individuals aged 20 to 50 owning cryptocurrency, according to a report from the Hana Institute of Finance [1]. These investors, on average, allocate 14% of their financial portfolios to crypto, with the highest ownership rate among those in their 40s. Retail investor interest in crypto-linked stocks has also grown, with their share of the top 50 net-bought equities rising to 31.5% in July [1].

Bithumb’s revisions reflect a growing consensus among market participants that tighter risk controls are necessary as the sector matures. While the changes are not a full withdrawal from leveraged lending, they indicate a strategic recalibration to ensure long-term stability and regulatory alignment [1].

Source:

[1] Cointelegraph - https://cointelegraph.com/news/bithumb-halves-crypto-lending-leverage-slashes-loan-limits

[2] Platinum - https://www.platinumcryptoacademy.com/