The South Korean Financial Services Commission (FSC) announced yesterday (8/19) that domestic cryptocurrency exchanges must immediately suspend lending operations until new guidelines are officially issued.
The South Korea FSC pointed out that it has issued administrative guidance letters to major exchanges, mandating the suspension of all cryptocurrency lending services until South Korea establishes appropriate guidelines for cryptocurrency lending, in order to avoid the market continuing to operate in a regulatory gray area and to reduce the risk of investors suffering significant losses due to leveraged operations.
Looking back on July 4th this year, South Korea's largest exchange Upbit was the first to launch 'collateralized lending' services, allowing investors to use deposits in Korean won or digital assets (USDT, Bitcoin, Ripple) as collateral, with a maximum loan value of up to 80% of the collateral. Subsequently, Bithumb also joined the fray, even offering lending plans with up to 4 times leverage, and other exchanges followed suit.
The South Korean FSC added that 'a certain cryptocurrency company' attracted over 27,600 investors in the first month of launching its lending service, with a total loan amount reaching 1.5 trillion Korean won (approximately 1.1 billion USD). However, due to severe price fluctuations, about 13% of investors were ultimately forced to liquidate, resulting in significant financial losses.
Even more concerning is that after exchanges successively launched USDT lending services, a large number of sell orders emerged in a short period of time, causing an abnormal drop in USDT and impacting market order.
The FSC emphasized that before the new guidelines are issued, exchanges must not add new lending services; however, existing contracts are allowed for investors to repay or extend as per agreement, to avoid an immediate market rupture.
If any operators refuse to comply with the administrative guidance, the regulatory authorities will initiate on-site inspections and may impose penalties.
In fact, this move echoes South Korea's progress towards 'regulatory easing.' Following the recent proactive promotion of cryptocurrency-friendly policies in the United States, South Korea is gradually shifting from its previous hardline stance to a cautiously open approach. Financial authorities have begun to lift the ban on institutional investment in crypto assets and are preparing to launch the country's first cryptocurrency spot ETF.
At the same time, under the leadership of South Korean President Lee Jae-myung, the country is actively constructing a 'Korean won stablecoin' market in hopes of establishing a localized cryptocurrency financial ecosystem.
Further Reading
The South Korean President convenes the four major banks to discuss the Korean won stablecoin with Circle, aiming for the passage of the October bill.
This article is reprinted with permission from: (Blockcast)
Original Title: (Postponed Operation Before New Guidelines! South Korea's 'Cryptocurrency Lending Services' Fully Halted)
Original Author: Block Girl MEL
'Cryptocurrency Lending Risks Surge, South Korea's FSC Strikes Hard, Fully Halting Exchange Lending Services' was first published on 'Crypto City'
