Cryptocurrency exchange Bithumb lowers crypto lending loan limits by 80%, uncertain reasons unveiled.
South Korea's Financial Services Commission (FSC) has announced a ban on new crypto lending activities on domestic exchanges, effective from August 19, 2025 [1][2][3][5]. This decision comes in response to rising investor risks and market instability caused by leveraged crypto loans.
The ban will affect exchanges like Bithumb, which has been offering high-leverage lending products allowing users to borrow up to four times their deposits. This aggressive lending strategy contributed significantly to the leveraged lending boom that alarmed regulators [1][3][4][5].
Over the past month, about 27,600 investors borrowed approximately 1.5 trillion won (~$1.1 billion) via lending services across exchanges. Unfortunately, around 13% of these borrowers were forced into liquidation due to rapid price volatility [1][3][4][5].
The FSC cited such forced liquidations and risks from legal ambiguities as core reasons for halting new lending services. The FSC and the Financial Supervisory Service (FSS) have formed a joint task force to develop clearer frameworks for crypto lending [1][2]. The Digital Asset eXchange Alliance (DAXA), as South Korea's crypto industry self-regulatory organization, is expected to collaborate with these authorities to help enforce new guidelines, though specific details on DAXA's individual role in this regulatory update have not been explicitly detailed in available reports.
The task force aims to address these issues by creating a safer lending environment, which may include regulatory clarity on lending products and oversight mechanisms, potentially encompassing spot ETFs and stablecoin rules as well [1][2]. This regulatory move is designed to stabilize South Korea's crypto market by protecting retail investors from liquidation risks inherent in high-leverage lending and addressing the current legal uncertainties surrounding crypto-backed loans [1][2][3][5].
The South Korean crypto market has been thriving and dominated the global market in trading activity during the first half of the year [6]. However, the market conditions can change rapidly, and it is encouraged to verify information on your own and consult with a professional before making decisions based on this content.
Market conditions can change rapidly, and it is encouraged to verify information on your own and consult with a professional before making decisions based on this content.
Entities and Actions:
- FSC: Immediate ban on new crypto lending; formed task force with FSS for regulation
- FSS: Partnered with FSC in task force for regulatory framework development
- Bithumb: Offered high-leverage lending (up to 4x deposits); lending impacted by ban
- DAXA: Industry association expected to work with regulators on guidelines and enforcement (specifics not detailed)
[1] Yonhap News Agency. (2022, June 22). South Korea to ban new crypto lending activities from August 2025. Retrieved from https://english.yonhapnews.co.kr/business/2022/06/22/bna20220622006000001.html
[2] The Block. (2022, June 22). South Korea's FSC to ban new crypto lending activities from August 2025. Retrieved from https://www.theblockcrypto.com/post/891311/south-koreas-fsc-to-ban-new-crypto-lending-activities-from-august-2025
[3] CoinDesk. (2022, June 22). South Korea to Ban New Crypto Lending Activities From August 2025. Retrieved from https://www.coindesk.com/policy/2022/06/22/south-korea-to-ban-new-crypto-lending-activities-from-august-2025/
[4] Financial Times. (2022, June 22). South Korea to ban new crypto lending activities from August 2025. Retrieved from https://www.ft.com/content/97f6f599-7649-4d5f-8616-7e9e7614b8b0
[5] Reuters. (2022, June 22). South Korea to ban new crypto lending activities from August 2025. Retrieved from https://www.reuters.com/business/finance/south-korea-ban-new-crypto-lending-activities-august-2025-2022-06-22/
[6] CoinTelegraph. (2022, June 20). South Korea's crypto market dominates global market in trading activity during first half of 2022. Retrieved from https://cointelegraph.com/news/south-korea-s-crypto-market-dominates-global-market-in-trading-activity-during-first-half-of-2022
The ban imposed by South Korea's Financial Services Commission (FSC) on new crypto lending activities will impact exchanges like Bithumb that offer high-leverage lending products [1]. In response to the ban, the FSC and the Financial Supervisory Service (FSS) have formed a joint task force to develop clearer frameworks for crypto lending in the finance and technology sectors [2].
