South Korea to Tighten Crypto Lending Rules Amid High Leverage Risks

South Korea is moving swiftly to impose tighter regulations on leveraged cryptocurrency lending in response to growing concerns over financial risks and investor safety. The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have announced plans to finalize strict guidelines by the end of the month, targeting virtual asset exchanges that offer high-leverage lending products [1].

The regulatory push follows the introduction of services by major exchanges such as Upbit and Bithumb, where users can borrow up to four times the value of their collateral in cryptocurrencies like Bitcoin and Tether. This level of leverage has raised alarms among regulators, who warn that the inherent volatility of crypto markets could lead to severe losses for borrowers [1].

To address these concerns, a joint task force has been established, comprising the FSC, FSS, virtual asset exchanges, and the Digital Asset Exchange Joint Council. The task force aims to draft a comprehensive regulatory framework based on global best practices while tailoring the rules to the specific conditions of the South Korean market [1].

Key areas under consideration include the permissible levels of leverage, eligibility criteria for borrowers, types of collateral accepted, risk disclosure requirements, and the overall transparency of lending operations. The goal is to protect retail investors from the dangers of speculative trading and ensure that market stability is not compromised [1].

Regulators have also directed exchanges to reassess lending services that pose significant legal or financial risks. The upcoming guidelines are expected to mark the second phase of South Korea’s broader regulatory approach to virtual assets, with a strong emphasis on transparency and risk mitigation [1].

The new measures reflect South Korea’s increasingly proactive stance on crypto regulation, signaling a shift toward a more structured and investor-protected environment for digital asset lending [1].

Source: [1] South Korea Cracks Down on Leveraged Crypto Lending: New Rules Incoming

(https://www.livebitcoinnews.com/south-korea-cracks-down-on-leveraged-crypto-lending-new-rules-incoming/)