South Korea's financial regulatory agency plans to release guidelines for cryptocurrency lending services next month, aimed at strengthening regulation and protecting investors in the context of concerns raised by leveraged crypto products.
According to the Yonhap News Agency (YNA), the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) announced the establishment of a joint task force on Thursday to develop a regulatory framework for cryptocurrency lending. This initiative comes after local exchanges Upbit and Bithumb launched new lending services.
YNA reported that Bithumb allows users to borrow up to four times the value of their collateral assets, while Upbit offers loans of up to 80% of the user's total asset value.
The establishment of the task force aims to address the unclear investor protection measures and to remind the market of the potential loss risks associated with rapid market fluctuations.
It is reported that the task force members include representatives from the FSC, FSS, and the Digital Asset Exchange Alliance (DAXA). DAXA is a self-regulatory organization composed of South Korea's five major cryptocurrency exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax.
The task force will reference international rules, traditional securities market regulations, and the actual conditions of the local cryptocurrency market while formulating the cryptocurrency lending guidelines.
These guidelines are expected to cover leverage limits, user and asset qualifications, and risk disclosures. They will also propose transparency requirements for digital asset activities related to lending.
Regulators have also requested that exchanges conduct self-inspections on high-risk and legally ambiguous services, including those offering high leverage or fiat-denominated lending services.
The new regulations are expected to serve as the foundation for future cryptocurrency legislation and reflect the government's efforts to enhance accountability in the digital asset sector.
At the same time, the Bank of Korea is transforming its existing central bank digital currency (CBDC) research team into a virtual asset team, taking on broader responsibilities.
The Bank of Korea stated that the virtual asset team will be responsible for matters related to stablecoins and other crypto assets and will collaborate with the government during the legislative process.
As the Bank of Korea takes measures related to stablecoins, the stock prices of Korean banks have risen in tandem. The establishment of the virtual asset committee was also announced.
In June, Google Finance data showed that Kakao Bank, Kookmin Bank, and the Industrial Bank of Korea saw their stock prices rise by 10% to 19% after applying for trademarks related to stablecoins.
Related: Coinbase's second-quarter revenue fell short of expectations, with stablecoin earnings and favorable policies pointing to long-term growth.
Original article: “South Korea to Regulate Leveraged Cryptocurrency Lending Services with New Rules”
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