Bithumb Resumes Crypto Lending With 2x Leverage Cap and 145000 Loan Limit

Bithumb, one of South Korea’s leading cryptocurrency exchanges, has resumed its crypto lending service after a brief suspension in late July 2024. The exchange attributed the pause to low user participation but announced that it has since introduced a revised model it describes as safer and more sustainable for its customers. The updated terms include significant reductions in leverage and loan limits, reflecting a broader shift in the regulatory environment and investor caution [1].

Previously, Bithumb allowed users to leverage their positions up to 4x. Now, the maximum leverage has been cut to 2x. Additionally, the largest possible loan amount has dropped from 1 billion won (approximately $726,000) to 200 million won ($145,000). These changes apply uniformly, even to seasoned traders with high trading volumes, highlighting the platform’s commitment to minimizing exposure to risky borrowing behavior [1].

The timing of these adjustments aligns with increasing regulatory pressure on crypto lending activities in South Korea. Just days before Bithumb’s relaunch, the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) joined forces with key industry players to form a dedicated task force aimed at establishing standardized lending guidelines for virtual assets. The initiative includes representatives from major exchanges, the Korea Institute of Finance, and the Digital Asset eXchange Alliance (DAXA), underscoring the collaborative nature of the regulatory effort [1].

The task force is expected to focus on critical areas such as leverage ceilings, the types of assets deemed eligible for lending, and the requirement for clearer risk disclosures. Regulatory authorities have also called on platforms to re-examine services that might be considered legally ambiguous or excessively risky, especially those involving high leverage or fiat-backed crypto loans. Bithumb stated that its internal review was conducted in close coordination with regulators, ensuring the revised lending terms comply with both domestic regulations and evolving global standards [1].

The decision to tighten lending rules follows a broader trend of increased oversight in the crypto sector. Regulators are paying particular attention to the risks associated with over-leveraged positions, which contributed to significant market instability in recent years. By reducing leverage and loan limits, Bithumb aims to create a more resilient framework for crypto lending while addressing concerns raised by both regulators and investors [1].

The resumption of lending services with stricter parameters is likely to influence other exchanges in South Korea to follow similar measures. As the regulatory environment continues to evolve, exchanges must balance innovation with risk management to ensure long-term sustainability in the crypto lending space [1].

Source: [1] Bithumb Resumes Crypto Lending with Stricter Rules on Leverage and Loan Limits (https://coinmarketcap.com/community/articles/689b6617ee3ff123884a9846/)