South Korea’s financial regulator, the Financial Services Commission (FSC), has ordered a temporary suspension of all crypto lending services offered by local exchanges. This immediate ban is in effect until a new regulatory framework is established.
The move comes in response to the rapid and risky growth of these lending products. Since July, platforms like Upbit and Bithumb launched services allowing users to borrow against their crypto or fiat deposits. Upbit’s program saw 27,600 investors borrow a staggering $1.1 billion in its first month, with a significant 13% of borrowers being liquidated due to market volatility. The FSC also noted that these services caused unusual price disruptions for stablecoins like Tether (USDT).
While this decision puts a halt on current lending practices, it is part of a broader trend toward regulated crypto adoption in South Korea. The country is lifting restrictions on institutional trading and plans to approve its first spot crypto ETFs. The government is also working on a new stablecoin framework. This indicates that while the authorities are cracking down on what they see as risky, unregulated activity, they are also paving the way for more mainstream and secure digital asset investments.
August 2025, Cryptoniteuae
