South Korea’s Financial Services Commission (FSC) has announced new rules for crypto lending services offered through centralized exchanges.
South Korea Introduces New Regulation on Crypto Loans: Interest Rate Cap 20%
The Commission stated in a press release that the regulation “aims to strengthen user protection, taking into account global examples.”
Under the new regulations, leveraged loans exceeding collateral value are prohibited. Additionally, a 20% cap has been imposed on crypto loan interest rates. Products requiring users to repay with cash are also banned due to their violation of credit regulations.
The FSC emphasized that companies offering these services may only use their own capital and will not be permitted to circumvent the rules indirectly through third-party services. Users’ credit limits will be determined based on their transaction history and experience. Furthermore, investors will be required to be notified in advance of any liquidation risks.
The new rules will only apply to the top 20 cryptocurrencies by market capitalization, or to crypto assets traded on at least three licensed local exchanges. If a cryptocurrency is categorized as “attention,” lending services for that asset will also be suspended.
The regulation comes into effect today, and compliance will be overseen by the Digital Asset Exchanges Association (DAXA). The FSC plans to transpose the rules into legal regulations based on implementation results.
This move follows last month’s FSC order to suspend lending services to Upbit, Bithumb, and other exchanges.
*This is not investment advice.
