South Korea orders crypto platforms to suspend lending services – BitRss

South Korea has cautioned cryptocurrency exchanges against offering new virtual asset lending options. On Tuesday, the Financial Services Commission of South Korea (FSC) sent a letter to exchanges operating in the country with directives to suspend crypto lending services. 

According to the statement, the regulator told the cryptocurrency exchanges to halt the offering until it introduced its regulatory framework for the digital assets sector. The clampdown came in response to the alarming losses of users’ funds to crypto lending programs in South Korea. 

More so, the regulator said the absence of a clear-cut regulation has exposed investors to huge risks. Pointing to thousands of forced liquidations in lending services, the FSC emphasized that cryptocurrency exchanges must halt the program or face serious reprimand.

Furthermore, the FSC stressed that it will conduct timely inspections to ensure compliance. Meanwhile, the South Korean regulator stated that existing contracts such as repayment and maturity extensions can run until due time. 

While discussing the risks of lending services in an unregulated market, the FSC disclosed that exchanges deploy the program to attract new users. The regulator mentioned how one crypto exchange gained 27,600 new customers within a month by launching a lending service. 

As revealed, the South Korean exchange saw an increase in trading volume that rose to $1.1 billion. However, on the downside, about 3,635 representing 13% of the new users lost their funds due to fluctuations in the price of digital assets. 

Likewise, the FSC discussed how two South Korea-based firms offered USDT ($1.00) lending options. The offering created a massive surge in the selling volumes of the stablecoin and caused a decline in its prices. 

Efforts to regulate crypto lending services in South Korea 

In July 2025, the FSC ordered cryptocurrency exchanges in South Korea to reevaluate their lending offerings. The regulator illustrated that there are indications that the services are exposed to fraud and exploitation that could cause huge losses. 

Due to that, Bithumb and Upbit the two leading crypto exchanges in the country halted their virtual assets leading option. It is worth mentioning that the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) joined forces on July 31, 2025. 

According to a joint statement, the two regulators said they formed a task force to design a regulatory guideline on crypto lending. The statement narrates how the framework will cover leverage limits, users’ eligibility, and risk disclosure for crypto lending options. 

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