South Korea’s top financial watchdog has moved quickly to rein in risky lending practices in the crypto industry.
The Financial Services Commission (FSC) announced new measures that put sharp limits on how exchanges can offer loan products, framing the move as a push to protect retail traders after months of scrutiny on local platforms.
The centerpiece of the policy is a hard ceiling: interest on crypto loans cannot exceed 20%. Leverage is also being clipped — exchanges are forbidden from issuing loans worth more than the collateral posted by users.
In addition, products that force repayment in cash have been outlawed, as regulators argued they resemble unlicensed credit services.
To prevent backdoor lending, companies will have to rely solely on their own capital, and borrowing limits will be set according to each user’s trading history. Platforms must also give advance warnings before liquidations, a first in the country’s crypto oversight framework.
Not every digital asset qualifies. The new rules only apply to the 20 largest tokens by market value or to coins listed on three or more licensed Korean exchanges. If a token is flagged as high risk, lending tied to it must stop immediately.
The Digital Asset Exchanges Association (DAXA) has been tasked with enforcement, and the FSC has hinted that the rules could eventually be written into law. The crackdown follows last month’s suspension of lending products at Upbit and Bithumb, a warning shot that foreshadowed today’s tighter regime.
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Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
Source: https://coindoo.com/new-south-korea-rules-slash-crypto-lending-rates-to-20/