South Korea has suspended new crypto lending services on local exchanges after $1.1 billion in borrowing caused market upheaval.
Reasons for Suspension
The Financial Services Commission (FSC) of South Korea halted new crypto lending services due to significant market disruptions. According to Lee Bok-hyun, the Chair of the FSC, "The services exist in a legal gray area and pose a high risk of user losses."
Market Impact
The suspension led to marked market volatility, including sharp price declines in stablecoins like Tether (USDT) on Korean exchanges. Liquidations created a scenario where collateral values prompted forced selling.
Regulatory Focus and Investor Safety
The FSC's actions highlight concerns regarding investor safety and regulatory compliance. The regulators plan to implement a zero-tolerance policy towards risks until risk management rules and consumer protection measures are established.
The suspension of crypto lending services in South Korea may lead to shifts in consumer behavior and a concentration of liquidity in decentralized finance, reflecting past regulatory restrictions.
