South Korean financial regulators are set to release guidelines on cryptocurrency lending services next month to tighten oversight and safeguard investors amid concerns regarding leveraged crypto products.
The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have established a joint task force to develop a regulatory framework for crypto lending in response to new lending services introduced by South Korean exchanges Upbit and Bithumb. According to Yonhap News Agency (YNA), Bithumb permits users to borrow up to four times their collateral, while Upbit offers loans up to 80% of a user’s asset value. The task force aims to address the lack of clear safeguards for investors and mitigate potential losses from market volatility.
The task force will comprise representatives from the FSC, FSS, and the Digital Asset eXchange Alliance (DAXA), a self-regulatory organization that includes Upbit, Bithumb, Coinone, Korbit, and Gopax. The group will consider international regulations, traditional stock market rules, and the characteristics of the local crypto market to formulate the crypto lending guidelines. These guidelines are expected to cover leverage limits, user and asset eligibility, risk disclosures, and transparency requirements for digital asset lending activities.
Authorities have also requested exchanges to review high-risk and legally ambiguous services, particularly those offering excessive leverage or fiat-based lending. The new regulations are intended to establish a foundation for future crypto legislation and reflect the government’s broader initiative to enhance accountability within the digital asset sector.
In a related development, the Bank of Korea is transforming its existing central bank digital currency (CBDC) research and development teams into a Virtual Asset Team with a broader mandate. The Bank of Korea stated that the Virtual Asset Team will address discussions concerning stablecoins and other crypto assets and collaborate with the government during the legislative process.
The announcement of the committee coincided with a surge in South Korean bank stocks following stablecoin-related actions. In June, Google Finance data indicated that companies like Kakao Bank, Kookmin Bank, and the Industrial Bank of Korea experienced surges of 10% to 19% after registering stablecoin trademarks.
