South Korea Imposes Strict Crypto Lending Rules to Boost User Protection
South Korea’s Financial Services Commission has introduced new crypto lending rules to curb excessive leverage and enhance user protection. The regulations bar loans exceeding collateral value and prohibit fiat-denominated loans, ensuring all lending stays within the virtual asset ecosystem. Virtual Asset Service Providers (VASPs) must use their own assets for lending and cannot act as intermediaries. First-time borrowers are required to complete an online course and pass a qualification test. Individual lending limits will be set based on user experience. Providers must issue pre-liquidation notifications and restrict lending to top-20 market-cap cryptocurrencies or assets listed on at least three won-denominated exchanges. These crypto lending rules aim to boost market stability, improve transparency, and foster greater institutional participation.
Bullish
The new crypto lending rules are bullish for the market. By curbing excessive leverage and enforcing transparency, they reduce systemic risk and protect retail investors. Historical events, such as margin-driven liquidations, have triggered rapid sell-offs during downturns. These regulations can prevent similar shocks and build confidence among institutional players. In the short term, VASPs may adjust products and volumes, causing minor liquidity dips. Over the long term, clearer oversight and mandatory education will foster a safer lending environment. Greater trust is likely to draw fresh capital and support sustainable growth in South Korea’s crypto market.