Catenaa, Wednesday, August 20, 2025- South Korea’s Financial Services Commission has ordered local crypto exchanges to immediately halt all lending services, citing risks to investors and market stability.
The suspension will remain until formal regulations are established, aiming to prevent losses linked to borrowing against digital assets.
The directive affects platforms including Upbit and Bithumb, where users had borrowed as much as 1.5 trillion won ($1.1 billion) in a single month.
Approximately 13 percent of borrowers faced forced liquidation due to price volatility, highlighting potential hazards in unregulated lending. Exchanges that fail to comply will be subject to on-site inspections.
Crypto lending had surged since July, with Upbit offering loans up to 80 percent of deposits in fiat or crypto and Bithumb extending loans up to four times user holdings.
The launches coincided with the Digital Asset Basic Act, which seeks to formalize lending services within exchanges, but regulators noted these products operated in a gray zone without clear oversight.
The FSC plans to issue a detailed rulebook to protect users and ensure market stability. Existing loans can still be repaid or extended under current contracts, and exchanges are expected to prepare for compliance once guidelines are finalized.
Despite the suspension, South Korea continues to advance regulated crypto adoption.
Authorities are lifting restrictions on institutional trading and preparing to approve the nation’s first spot crypto ETFs.
Stablecoin frameworks pegged to the Korean won are also underway, while exchanges like Upbit introduce cold storage custody solutions for institutional clients to safeguard digital assets against cyber threats.
