South Korea’s financial regulator, the Financial Services Commission (FSC), has mandated an immediate suspension of all new crypto lending services offered by domestic cryptocurrency exchanges. The decision—effective August 19, 2025—comes amid mounting concerns over investor risk and the absence of a comprehensive regulatory framework for virtual asset lending .
In recent weeks, soaring demand for crypto-collateralized loans has raised alarms. Approximately 27,600 users borrowed 1.5 trillion won (~$1.1 billion) from exchange-run lending programs, with around 13% facing forced liquidations due to sharp market swings . Additionally, lending in stablecoin markets led to notable price distortions, amplifying systemic risks
The FSC clarified that while existing lending contracts—such as repayments and extensions—will remain valid, no new lending should be initiated until regulators implement formal crypto lending guidelines . These guidelines are expected to include leverage limits, user eligibility criteria, and risk disclosure requirements, enhancing investor protection and market stability . Failure to comply may trigger on-site inspections and supervisory action
This regulatory move aligns with global efforts to regulate increasing crypto leverage and ensure that digital asset lending evolves under clear, protective oversight
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