South Korean financial authorities are preparing to introduce comprehensive regulations for cryptocurrency lending services by next month, aiming to curb excessive leverage and enhance investor protection in the volatile digital asset market.

Regulatory Task Force Established

The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have formed a joint task force to develop guidelines addressing key concerns in crypto lending practices. This move comes as major exchanges like Upbit and Bithumb have begun offering leveraged lending products, with Bithumb permitting 【4x】 leverage ratios and Upbit allowing 【80%】 loan-to-value ratios against collateral.

——This regulatory intervention reflects growing concerns about investor risks in unregulated crypto lending markets—— said a senior FSC official speaking anonymously. The task force includes representatives from DAXA, the self-regulatory body comprising South Korea's five largest exchanges.

Proposed Regulatory Framework

The forthcoming guidelines are expected to establish:

• Strict leverage ceilings for crypto lending products
• Eligibility criteria for both borrowers and acceptable collateral assets
• Enhanced risk disclosure requirements
• Transparency standards for lending operations

Authorities have specifically flagged high-risk services including fiat-based lending and excessive leverage offerings as requiring immediate review. The regulations will draw parallels with traditional securities lending rules while incorporating crypto-specific considerations.

Broader Regulatory Landscape

This initiative aligns with South Korea's expanding crypto oversight framework. Notably, the Bank of Korea recently established a Virtual Asset Team to monitor stablecoins and other digital assets, while major financial institutions have begun exploring blockchain-based financial products.

Interestingly, the announcement follows significant stock price surges for South Korean banks filing stablecoin-related trademarks, suggesting growing institutional interest in regulated digital asset services. Market observers anticipate these lending rules will serve as a foundation for future comprehensive crypto legislation.

As of press time, neither Upbit nor Bithumb has commented on potential service modifications to comply with the upcoming regulations. The task force's final recommendations are expected by late August 2025.