The South Korean Monetary Providers Fee (FCS) ordered a direct halt to all crypto lending on home exchanges, efficient from August 19. The lending ban goals to guard retail traders from dangerous practices.
South Korean exchanges picked up the development from DeFi protocols, the place Aave turned the chief and revived the influx of liquidity. Simply days earlier than regulators moved in with a direct halt to lending, Bithumb slashed its leverage by half, solely providing 2X collateralized loans. The trade plans to construct an impartial lending platform sooner or later.
Bithumb voluntarily diminished its lending leverage, based on South Korean media. In August, regulators had been already deliberating on the problem of lending regulation, although with no fast ban.
South Korean exchanges supplied dangerous leveraged crypto loans
South Korean exchanges picked up exercise in 2025, with extra retail consumers searching for the most well liked cash. Since July, native crypto exchanges like Upbit have allowed vital unregulated lending. Leveraged lending was additionally the largest downside, resulting in potential liquidations and losses, in addition to anomalies when utilizing stablecoins.
Customers might borrow towards as much as 80% of the worth of their BTC, XRP, or USDT holdings. Bithumb additionally supplied riskier loans of as much as 4 instances the collateral. This dangerous supply of liquidity might result in unwinding and liquidations within the case of a bear market. The speedy rise of lending companies alarmed regulators, who moved in with new compliance requests.
For the reason that launch of exchange-based lending, retail borrowed the equal of $1.1B in a single month, unfold throughout 27,600 accounts. Round 13% of loans had been liquidated in worth swings. After the brand new halt comes into drive, legacy loans will proceed till repaid, however exchanges are banned from new lending.
Lending could resume as soon as the regulator units up new pointers and security options. South Korea has tried to construct formal crypto rules, to organize for spot ETFs. Native banks are additionally assembly to organize for eventual stablecoin regulation, as Cryptopolitan lately reported.
South Korea spreads affect via chosen belongings
The South Korean market boosts chosen cash and tokens. XRP is among the many belongings with vital legacy illustration on South Korean exchanges. Round 13.97% of XRP volumes are towards the South Korean loans. Legacy meme tokens and altcoins additionally depend upon South Korean exchanges.
For Pudgy Penguins (PENGU), the share of the Korean Received is as much as 18.8%, resulting in outsized worth rallies. South Korean exchanges stay comparatively conservative with their listings, usually providing possibilities for cash and memes to make a return after years on worldwide markets. These exchanges have stricter necessities for liquidity and market longevity earlier than including belongings.
For blue-chip buying and selling, the Korean received is much less related, with a small share of BTC and ETH exercise. The Korean received premium can also be comparatively smaller. The introduction of native stablecoins could additional displace the fiat forex as a supply of liquidity.
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