South Korea’s financial regulators have taken decisive action by instructing cryptocurrency exchanges to suspend the rollout of new lending services. This directive aims to shield investors and the broader market from unchecked risk.
The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) are jointly developing comprehensive guidelines for crypto lending. These rules will cover areas such as allowable leverage, suitable borrower profiles, and mandatory risk disclosures.
Existing contracts with ongoing repayment or maturity terms are permitted to continue under the current framework. In addition to the suspension, interest rates for crypto lending have now been capped at 20 percent, while leveraged lending has been explicitly banned.
To further safeguard consumers, first time borrowers must now complete online educational training and meet suitability criteria set by the Digital Asset eXchange Alliance (DAXA).
This enforcement follows a spike in liquidations; at one exchange, over 27,000 borrowers were affected, with 13 percent forced to liquidate due to volatile collateral values.
Authorities have warned that noncompliance will result in on site inspections and possible penalties. Critics argue the suspension is a blunt instrument and recommend focusing instead on building robust regulatory infrastructure.
In summary, South Korea’s move marks a clear inflection point toward safer, more structured crypto lending. As regulators finalize their framework, the emphasis is shifting to responsible innovation, not abrupt shutdowns.
