South Korea’s high monetary regulator ordered crypto exchanges to droop new digital asset lending providers, citing mounting dangers and highlighting a necessity for clear guidelines.
The Monetary Providers Fee (FSC) stated on Tuesday that it despatched letters to exchanges requesting the suspension of latest crypto lending till it completes tips. Present contracts, like repayments and maturity extensions, will likely be permitted.
On July 31, the FSC and the Monetary Supervisory Service (FSS) introduced they’d shaped a joint activity drive to develop a regulatory framework for crypto lending. The rules are anticipated to cowl leverage limits, consumer eligibility and danger disclosures for digital asset lending actions.
The FSC stated it could conduct on-site inspections and take supervisory motion in opposition to platforms that didn’t comply.
Pressured liquidations spotlight pressing want for clear guidelines
The transfer follows experiences of widespread consumer losses, together with 1000’s of compelled liquidations in exchange-run lending applications.
One unidentified change drew about 27,600 customers in a month after launching a lending service in mid-June, the FSC stated. The platform recorded about 1.5 trillion Korean received ($1.1 billion) in quantity. Of these customers, about 13%, or 3,635 individuals, suffered compelled liquidations as their crypto positions fell in worth.
The FSC additionally pointed to 2 firms that provided Tether (USDT) lending providers, which triggered a surge in promoting quantity and an uncommon decline in USDT costs. The company stated persevering with new lending operations with out safeguards may additional injury investor funds.
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Crypto lending a grey space in South Korea
Since 2020, South Korea has laid foundational regulatory groundwork for digital asset service suppliers (VASPs).
This contains Anti-Cash Laundering (AML) and Journey Rule mandates beneath the revised Act on Reporting and Utilizing Specified Monetary Transaction Info.
In 2023, the nation’s Digital Asset Person Safety Act got here into drive, making a authorized foundation for penalties in opposition to unfair actions like market manipulation and mishandling of consumer deposits.
Regardless of these, crypto lending has remained in a authorized grey zone, working with out clear regulatory frameworks or a licensing regime.
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