South Korean financial regulators are scrutinizing new crypto lending and margin trading services offered by the nation’s two largest exchanges, Upbit and Bithumb. The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have expressed serious concerns over the high leverage ratios, which they believe pose significant risks to investors and may violate existing lending laws.
Bithumb and Upbit recently launched services that allow users to borrow cryptocurrencies using their existing holdings as collateral. These platforms enable high-leverage trading, including short sales, and are a cause for alarm for regulators. They are particularly worried about Bithumb’s 4:1 leverage ratio, which is twice the limit for South Korea’s traditional stock market.
Following the regulatory pushback, Upbit has already suspended its Tether lending service. Bithumb has adjusted its service but maintained the 4:1 leverage, citing an exhausted inventory as the reason for temporarily halting new applications. In response, regulators are forming a task force with the crypto industry to create new self-regulatory guidelines for these services.
This regulatory action comes as South Korea weighs other changes to its crypto policies. The government is considering reclassifying crypto firms as “venture companies,” which would give them access to tax benefits and subsidies. This would be a major shift, as current laws group crypto firms with gambling and entertainment venues.
August 2025, Cryptoniteuae
