On September 5, South Korea's Financial Services Commission (FSC) introduced updated guidelines for crypto lending aimed at improving user protections and regulating digital assets.
Key Changes in Regulations
The new guidelines impose a 20% cap on annual interest rates and ban all forms of leveraged loans exceeding the value of collateral. Platforms are prohibited from offering loan products that must be repaid in fiat currency, which are deemed violations of existing credit laws.
User Protection and Limitations
Crypto lending is now restricted to the top 20 cryptocurrencies by market capitalization or those listed on at least three licensed exchanges in South Korea. Tokens marked as 'cautionary' by an exchange must be completely removed from lending activities. User-specific protections, such as loan caps based on a borrower's trading history and transaction history, have also been established.
Future of Crypto Industry Regulation
The rules enacted by the FSC are a precursor to formal legislation which will be drafted based on real-world enforcement outcomes. Oversight will be provided by the Digital Asset Exchange Alliance (DAXA), the industry's joint regulatory consultative body.
The updated guidelines from the FSC demonstrate South Korea's commitment to investor protection and market regulation in the cryptocurrency landscape, which could significantly impact current industry practices.
