South Korea has suspended new digital asset lending services in response to mounting risks and uncertainty in the sector. Previously, the country's regulators announced the initiation of work on establishing clear rules.
Regulatory Measures Due to Risks
The Financial Services Commission (FSC) announced a temporary suspension of new cryptocurrency lending services to ensure investor protection and to develop necessary guidelines. FSC sent letters to exchanges requesting the suspension of these services until standard regulations are finalized.
Impact on Users and Financial Platforms
This decision was prompted by reports of significant user losses, including thousands of forced liquidations in exchange loan programs. One example showed that an exchange attracted about 27,600 users after launching its lending service, with around 3,635 individuals facing forced liquidations.
Cryptocurrency Lending in a Legal Gray Area
In an effort to regulate the market, the FSC continues to develop regulatory frameworks for cryptocurrency lending. Despite existing regulations against money laundering and user protection, lending services remain in a legal gray area, posing risks to users.
The suspension of new cryptocurrency lending services in South Korea highlights the need for clear and transparent regulations to ensure investor safety and market stability.
