South Korea's financial regulators are set to implement new regulations on leveraged crypto lending by August 2025.
Main Institutions
The main institutions involved in the rule development are the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). The Digital Asset eXchange Alliance (DAXA) has also been integrated into the process. Major exchanges like Upbit and Bithumb are reviewing their leveraged lending products and will likely face new restrictions.
Impact and Implications
Immediate effects include exchanges reevaluating lending offerings and potentially implementing stricter user criteria. High leverage lending will be curtailed, affecting returns and trading strategies for investors. The financial implications could be significant, with potential impacts on liquidity and valuation of cryptocurrencies listed on Korean exchanges. Market volatility and temporary outflows might occur.
Previous Regulatory Actions
Previous regulatory actions in South Korea have led to short-term market disturbances but have increased longer-term stability. Key assets impacted are likely to include prominent cryptocurrencies like BTC and ETH, often used as collateral in lending services.
The introduction of new leveraged lending rules by 2025 aims to mitigate market risks and enhance investor protection in South Korea's crypto industry.
