South Korea to Set Crypto Lending Rules in August Amid Regulatory Tightening

South Korea is set to roll out formal guidelines for cryptocurrency lending services in August, as regulatory oversight tightens in response to growing concerns over risk exposure and investor protection [1]. This move reflects the country’s efforts to manage the fast-evolving digital asset landscape, where major exchanges have introduced high-leverage lending products that raise red flags amid market volatility.

Leading exchanges, including Upbit and Bithumb, have been offering crypto-backed loans with leverage as high as four times the collateral value or 80% of the user’s asset holdings [1]. These services, currently operating without specific regulatory oversight, have drawn scrutiny from both policymakers and investors, particularly in light of the inherent volatility in the crypto market.

To address these concerns, South Korea’s Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have formed a joint task force to design the country’s first regulatory framework for crypto lending [1]. The task force includes representatives from the Digital Asset eXchange Alliance (DAXA), a self-regulatory body that represents major exchanges such as Upbit, Bithumb, Coinone, Korbit, and Gopax [1]. The initiative aims to integrate global standards, existing securities laws, and the unique dynamics of the digital asset ecosystem into a cohesive regulatory strategy.

The guidelines are expected to clarify operational boundaries, impose leverage caps, and enforce stricter risk disclosures and transparency protocols [1]. Exchanges have been urged to re-evaluate their lending products, particularly those involving excessive leverage or lacking clear legal frameworks [1]. This includes fiat-based loans and other services deemed high-risk by authorities, which must now be reviewed to ensure investor safety and legal clarity.

In parallel, the Bank of Korea has expanded its mandate by restructuring its central bank digital currency (CBDC) teams into a broader Virtual Asset Team [1]. The new committee will oversee issues related to crypto assets, including stablecoins, and collaborate with the government during the legislative process [1]. This development follows rising interest in stablecoin innovation within the traditional banking sector in South Korea.

Recent data from Google Finance shows a 10% to 19% surge in shares of Korean banks like Kakao Bank, Kookmin Bank, and the Industrial Bank of Korea after they registered trademarks related to stablecoins [1]. These developments underscore the growing convergence between traditional finance and the crypto space in the country.

The combined regulatory efforts—spanning lending rules, stablecoin oversight, and CBDC strategy—signal South Korea’s intent to build a comprehensive governance model for digital finance. This comes as domestic exchanges increasingly expand offerings that closely mirror traditional financial instruments.

Source: [1] South Korea to Unveil Crypto Lending Rules in August as Oversight Intensifies (https://invezz.com/news/2025/07/31/south-korea-to-unveil-crypto-lending-rules-in-august-as-oversight-intensifies/)