South Korea Halts New Crypto Lending After Bithumb Liquidations
South Korea’s Financial Services Commission has temporarily suspended new crypto lending services after significant liquidations at local exchange Bithumb. In June, around 27,000 users accessed Bithumb’s lending platform, with about 13% forced into liquidation amid volatile markets. Regulators cited inadequate user protections and risks to market integrity, pausing new lending until a Virtual Asset Leasing Services Guide is published. Meanwhile, Galaxy Digital reports outstanding crypto-collateralized debt on centralized and decentralized platforms has risen to $44.25 billion, a 30% quarter-on-quarter increase. Traders should monitor regulatory updates and leverage indicators as this move underscores growing scrutiny of crypto lending and market leverage. In the short term, reduced leverage may lower liquidity and trigger bearish sentiment; in the long term, clearer rules could foster stability and attract institutional participation.
Bearish
The suspension of new crypto lending services in South Korea directly limits market leverage and reduces liquidity, which can pressure asset prices downward in the short term. The move highlights regulatory uncertainty and increasing scrutiny of lending platforms following the Bithumb liquidations and a 30% surge in crypto‐collateralized debt. While clearer rules and the forthcoming Virtual Asset Leasing Services Guide may support long-term stability and institutional inflows, the immediate effect is likely bearish for crypto markets as traders adjust positions and de‐risk amid tighter lending conditions.