Bithumb halves crypto lending leverage cuts loan limits by 80% in response to regulatory push

South Korean cryptocurrency exchange Bithumb has significantly tightened the rules governing its crypto lending service, reducing leverage by half and cutting maximum loan limits by 80% following regulatory scrutiny [1]. The exchange suspended its lending operations on July 29 due to “insufficient lending volume” and resumed the service on August 6 with revised terms, according to the South Korean newspaper Kookmin Ilbo [1]. The maximum leverage ratio was reduced from 4x to 2x, and the lending cap was cut from 1 billion won ($726,000) to 200 million won ($145,000) [1]. These changes apply uniformly, including to high-volume traders with more than 100 billion won ($72 million) in cumulative trading volume over the past three years [1].

Bithumb cited the need to “protect investors and improve service quality” as the rationale for the adjustments [1]. The revisions come after a comprehensive review of the service, reportedly conducted in coordination with regulators. The move aligns with broader regulatory efforts in South Korea to establish clearer guidelines for the crypto lending sector. On July 31, the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) formed a task force with the Korea Institute of Finance and local exchanges to draft “Virtual Asset Lending Service Guidelines.” The task force includes representatives from major exchanges and regulatory bodies and aims to address leverage limits, asset eligibility, and risk transparency [1].

South Korea’s regulatory bodies have urged exchanges to reassess services deemed high-risk or legally ambiguous, particularly those involving excessive leverage or fiat-based loans [1]. Bithumb’s updated terms reflect this regulatory push, as the exchange reportedly reviewed its service conditions with authorities before resuming operations. The changes indicate a growing emphasis on risk management and investor protection in the country’s crypto market.

The regulatory shift also highlights the growing mainstream adoption of crypto in South Korea. According to a report from the Hana Institute of Finance, more than one in four South Koreans aged 20 to 50 hold cryptocurrency, which accounts for an average of 14% of their financial portfolios [1]. Ownership is highest among individuals in their 40s, at 31%, followed by those in their 30s and 50s [1]. Additionally, retail investors have shown increasing interest in crypto-linked stocks, shifting their focus from US Big Tech equities to assets tied to the digital asset market [1].

The formation of the regulatory task force and Bithumb’s policy adjustments signal a coordinated effort to establish a more structured and transparent environment for crypto lending in South Korea. As the market continues to evolve, these developments may lead to a more stable and sustainable lending landscape.

Cointelegraph reached out to Bithumb for comment but had not received a response by the time of publication [1].

Source:

[1] Cointelegraph – Bithumb halves crypto lending leverage, slashes loan limits

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