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Korea bans leveraged lending in crypto sphere

Published: 05 Sep. 2025, 17:37

The Bitcoin price is displayed on an electronic board at the Bithumb Lounge in Gangnam District, southern Seoul, on Aug. 26. [YONHAP]

Korea will bar individual investors from borrowing more digital assets than the value of their holdings at local crypto exchanges as part of new restrictions introduced on Friday to curb excessive leverage and protect consumers.

The Financial Services Commission (FSC) and the Financial Supervisory Service said they will enforce the new guidelines on virtual asset lending services starting Friday. The move comes as local exchanges race to roll out crypto lending products, raising concerns about investor protection.

The government said the guidelines start as a self-regulatory measure but will eventually be written into law.

Under the guidelines, individuals cannot borrow more digital assets than they already hold as collateral, effectively banning leveraged lending. Exchanges must set lending limits based on user experience and trading history, ranging from 30 million won ($21,580) to 70 million won.

The watchdogs also prohibited so-called “cash-equivalent lending,” which allowed users to repay borrowed tokens at their original won value regardless of market price. Eligible assets are limited to cryptocurrencies ranked within the top 20 by market capitalization or traded on at least three won-based exchanges.

Exchanges must check whether new users have completed online training and passed a suitability test administered by the Digital Asset Exchange Alliance, an industry body formed by Korea’s major exchanges.

The rules cap fees at the legal maximum interest rate of 20 percent a year and require exchanges to disclose key information such as fee structures, lending volumes by token and the risk of forced liquidation either in real time or monthly.

“This measure addresses the lack of clear rules on virtual asset lending and ensures stronger investor protection,” an FSC official said.

Major platforms had offered aggressive lending products before the clampdown. Bithumb let customers borrow up to four times the value of their holdings while Upbit lent out tokens worth up to 80 percent of deposits in crypto or won.

The products spurred a wave of leveraged bets, driving up fees and allowing traders to deploy short selling strategies.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SEON-MI [[email protected]]