South Korea Caps Crypto Lending, Strengthens Safeguards
South Korea’s Financial Services Commission (FSC) and Financial Supervisory Service (FSS) will introduce new crypto lending guidelines in August to tighten oversight of leveraged lending. A joint task force, including regulators and the Digital Asset eXchange Alliance, will set leverage limits, define eligible users and assets, and mandate risk disclosures and transparency requirements. The new crypto lending rules address high-risk borrowing services on major exchanges like Bithumb and Upbit, which offer up to 4x collateral loans or 80% asset-value loans. Exchanges must review and adjust high-leverage products ahead of the second phase of the country’s virtual asset regulation. These crypto regulations draw on global best practices to curb speculation, enhance market stability, and strengthen investor protection. Meanwhile, the Bank of Korea is forming a Virtual Asset Team to advance CBDC, stablecoin, and broader crypto asset oversight.
Bearish
Capping leverage in crypto lending reduces traders’ borrowing power and curbs speculative margin positions, which is likely to dampen short-term price rallies. While enhanced investor protection and market stability measures can support long-term confidence, the immediate effect of tighter leverage limits typically exerts downward pressure on crypto asset prices, making market sentiment more cautious.