South Korea orders suspension of 'crypto lending services': Leverage threatens market security, waiting for complete regulatory guidelines

The South Korean Financial Services Commission (FSC) suddenly issued an order today (19th) requiring all domestic cryptocurrency exchanges to suspend their crypto lending services until complete regulatory guidelines are issued. (Previous report: Is a Korean Won stablecoin coming? South Korea will submit a "Stablecoin Regulatory Bill" in October, and the four major banks plan to meet with the president of Circle next week.) (Background supplement: Bithumb, Upbit leverage too high? South Korea predicts the release of "Virtual Asset Lending Service Guidelines" in August, drafting seven core issues.) The South Korean Financial Services Commission (FSC) suddenly issued an order today (19th) requiring all domestic cryptocurrency exchanges to suspend their crypto lending services until complete regulatory guidelines are issued. Why did the FSC suddenly slam on the brakes? The FSC pointed out that the trigger for this decision stemmed from the launch of a lending service by a certain digital asset company. However, only one month later, approximately 27,600 investors had lent out approximately 1.5 trillion Korean won through the service. Due to market volatility, 13% of the users were forced to liquidate their positions, resulting in losses for investors. The FSC added that shortly after exchanges launched USDT lending services, a surge in sell orders also caused abnormal declines in the prices of stablecoins on these exchanges, causing market chaos and showing that leveraged lending is posing a threat to the market. The FSC further pointed out that lending services are currently still in a "legal gray area," with no capital adequacy ratio threshold and a lack of investor protection mechanisms, posing a high threat to retail investors. The regulatory unit's measure of "suspending first, then legislating" aims to prevent the high volatility risk of digital assets from spreading to traditional financial markets. To this end, the FSC and the Financial Supervisory Service (FSS) have established a working group and are expected to develop temporary guidelines within a few weeks. In the statement, the FSC also emphasized that future regulatory priorities will be placed on leverage limits, risk disclosure, and user qualifications, and is considering introducing a margin ratio system similar to the securities market. The next step in dual-track regulation Although the FSC has pressed the "pause button" on the crypto lending market, the South Korean government has expressed its support for regulated innovation. According to a Cointelegraph report, South Korean regulators are simultaneously promoting related products such as stablecoins and spot ETFs, and the Lee Jae-myung government also plans to submit a stablecoin bill linked to the Korean Won in October to reduce reliance on US dollar stablecoins and control monetary sovereignty. Related reports Koreans rush to buy "crypto American stocks," BitMine becomes the number one target The truth behind South Korea's promotion of stablecoin policies? K-Pop becomes a power application scenario South Korea's crypto market volume and price surge! Upbit's trading volume exceeds US$10 billion, and popular tokens double in a single day "South Korea orders suspension of 'crypto lending services': Leverage threatens market security, waiting for complete regulatory guidelines" This article was first published on BlockTempo, the most influential blockchain news media.