South Korea to Curb Crypto Leverage: New Lending Rules Incoming
South Korea’s financial regulators are taking aim at the risks associated with high-leverage cryptocurrency lending. A joint task force, comprising members from the Financial Services Commission (FSC), the Financial Supervisory Service (FSS), and the Digital Asset eXchange Alliance (DAXA), is drafting new guidelines to regulate this practice. The move follows the introduction of high-risk lending options by major exchanges like Bithumb and Upbit, allowing users to borrow significantly more than their collateral. Bithumb, for example, permitted borrowing up to four times the collateral, while Upbit offered loans of 80% of users’ asset value. These practices have raised concerns about investor protection, particularly given the volatility of the crypto market. The new regulations will likely address several key areas: leverage limits, stricter eligibility criteria for both assets and users, mandatory risk disclosures to enhance transparency, and clearer guidelines for fiat-based lending. The aim is to create a more structured regulatory environment for crypto lending, acting as a foundation for broader digital asset legislation. This initiative is part of a wider push by South Korea to strengthen oversight of the digital asset sector, mirroring global trends spurred by the high-profile collapses of platforms like Celsius and BlockFi in 2022. The task force’s work reflects a growing international focus on protecting retail investors from the potential pitfalls of highly leveraged cryptocurrency trading. The draft guidelines are expected next month, and industry stakeholders anticipate stricter rules governing leveraged lending services on South Korean exchanges. This proactive approach aims to prevent similar investor losses seen elsewhere and contributes to a more secure and regulated crypto market within South Korea.
South Korea’s new regulations aim to stabilize crypto monetary systems by reducing excessive borrowing and high-risk trading practices.
(Source: https://bitcoinist.com/crypto-leverage-under-fire-south-korea-set-tighten/)
South Korea’s new regulations aim to strengthen oversight of crypto monetary systems while protecting investors from excessive leverage risks.
South Korea’s new regulations aim to stabilize crypto monetary systems by reducing excessive leverage in digital asset lending practices.
