TLDR:
- South Korea’s FSC halted new crypto lending after investors borrowed ₩1.5 trillion and 13 percent were liquidated in a month.
- Exchanges like Upbit and Bithumb offered lending up to 80 percent collateral or four-times leverage before FSC stepped in.
- The regulator flagged USDT sell-offs tied to lending as a source of market disruption on Korean platforms.
- Existing lending contracts can be repaid or extended but fresh loans are blocked until clear crypto lending rules emerge.
The Financial Services Commission has hit pause on new crypto loans. It surfaced amid a wave of heavy retail borrowing. About 27,600 users piled into lending programs.
Roughly ₩1.5 trillion was borrowed in one month. Then volatility struck. Around 13 percent of borrowers were liquidated.
Lending Spree Spurs Alarm at FSC
The regulator moved after exchange platforms like Upbit let users borrow up to 80 percent of their deposit value. Rival Bithumb went further, extending loans worth up to four times collateral. These lending options drew a fast surge in activity.
The FSC warned these loan programs tap into a legal gray area with real risk to retail investors, according to reports.
The lending boom came with red flags. The FSC pointed to a sudden spike in USDT sell orders that briefly disrupted its price. That raised alarm about how lending could distort trading and stablecoin markets.
In the end, the FSC ordered exchanges to halt new lending effective August 19. Existing contracts can still run their course or be renewed. Fresh loans must wait until the regulator issues new guidance.
SOUTH KOREA ORDERS EXCHANGES TO HALT CRYPTO LENDING
– South Korea’s Financial Services Commission (FSC) ordered domestic exchanges to suspend all crypto lending programs starting Tuesday.
– The regulator said the products operate in a legal gray zone and pose risks of user… pic.twitter.com/qyar606noE
— BSCN (@BSCNews) August 19, 2025
Pause Opens Door to Structured Crypto Lending in Korea
This isn’t a total shutdown. The FSC said repayment or extension of current loans is allowed. But new transactions must stop until safeguards are ready.
Regulators are already drafting rules. The plan includes leverage caps, stricter disclosures, and clear user protections. On-site inspections will target noncompliant exchanges.
South Korea seeks to balance crypto growth with stability. This move aligns with broader steps, like preparing spot ETFs and stablecoin regulation. The lending freeze underscores a cautious stance toward high-risk practices.
