South Korea's financial regulators, including the FSC and FSS, have initiated investigations into the lending services offered by cryptocurrency exchanges Upbit and Bithumb due to concerns over investor protection.
Regulatory Scrutiny of Upbit and Bithumb
On July 25, 2025, South Korean regulators summoned executives from Upbit and Bithumb to discuss newly launched cryptocurrency lending services that involve significant leverage. Both exchanges faced criticism for inadequate user protections, leading to adjustments in their offerings. Bithumb exhausted its lending limits and paused new applications, while Upbit suspended its USDT lending service.
Comparison of Traditional and Crypto Leverage
South Korea's traditional stock market allows only a 2x leverage on ETFs, illustrating the disparity in regulatory approaches between conventional and cryptocurrency financial products. While Bithumb offers up to 4x leverage on ten cryptocurrencies, Upbit restricts its offerings to three coins with an 80% LTV limit.
Future of Self-Regulation in the Crypto Industry
The lack of adequate safeguards and legal clarity prompted financial authorities to engage with the exchanges, initiating a collaborative effort to establish self-regulatory guidelines. This underscores the industry's need to adapt to legislative expectations. However, no direct quotes from executives of Upbit or Bithumb, nor from officials at the FSC or FSS, are currently available.
The actions of regulators indicate caution and increased scrutiny within the South Korean cryptocurrency market, suggesting an ongoing need for the industry to enhance transparency and compliance.
