The South Korean financial regulatory agency has recently officially requested domestic cryptocurrency exchanges to temporarily suspend cryptocurrency lending services, a move that demonstrates tightened supervision of a rapidly developing but high-risk sector.
According to information from the South Korean Financial Services Commission (FSC), cryptocurrency lending activities currently remain in a "legal gray area" and could harm investors if not strictly controlled. Previously, some major exchanges like Upbit and Bithumb had implemented lending services, allowing users to mortgage digital assets to borrow additional cryptocurrencies. However, many customers were forced to close positions during significant price fluctuations, resulting in losses.
The FSC emphasized that while awaiting an official legal framework, exchanges must cease all new lending services. Nevertheless, previously signed contracts may still be extended or settled, to ensure basic user rights. The regulatory agency also declared it will conduct on-site inspections for exchanges that do not comply with regulations.
This move occurs against the backdrop of South Korea becoming one of the world's most dynamic cryptocurrency markets. The government continues to tighten controls following a series of scandals, including the Terra-LUNA project's collapse, which shocked the global market and caused massive investor losses.
In a broader context, many Asian countries are taking similar steps. China maintains a "ban" on cryptocurrency trading, while Japan and Singapore choose to manage through clear legal frameworks, aiming to protect investors while not hindering innovation. South Korea's temporary suspension of lending services indicates they are following a "strict management first, then gradual relaxation" approach to avoid repeating previous market shocks.
In the US, where the political landscape is experiencing significant changes after Donald Trump's re-election as President from late 2024, the new administration is also considering more detailed regulations for digital asset markets. Previously, Trump had often expressed skepticism about cryptocurrencies, but with pressure from Wall Street and the tech industry, the new administration is likely to develop a clearer management strategy, rather than allowing the market to operate freely.
