1 month ago
South Korea’s Financial Services Commission (FSC) has ordered exchanges to suspend caller crypto lending products until ceremonial guidelines are successful place, citing mounting risks to users and marketplace stability.
Regulators pointed to a recent incidental astatine Bithumb wherever much than 27,000 customers tapped lending services successful June, with 13% forced into liquidation aft collateral values swung against them.
The determination by the FSC comes days aft analysts astatine Galaxy Digital published a study wherever they flagged the increasing magnitude of leverage successful crypto markets arsenic a concern.
The administrative guidance, from the FSC allows existing loans to tally their people but bars the rollout of caller lending services. Officials said that if platforms disregard the directive, on-site inspections and different supervisory actions volition follow. Formal lending guidelines are expected successful the coming months.
Korea's crackdown lands arsenic crypto leverage globally surges backmost toward bull-market levels. Galaxy's study shows crypto-collateralized loans jumped 27% successful Q2 to $53.1 billion, the highest since aboriginal 2022.
Last week’s $1 cardinal liquidation wave, sparked by bitcoin’s retreat from $124,000 to $118,000, highlighted however rapidly overstretched bets tin unwind.
Analysts pass that accent points are already showing crossed the system: DeFi liquidity crunches, ETH staking exit queues, and widening spreads betwixt on-chain and over-the-counter dollar lending rates.
However, not everyone agrees with the attack the Korean authorities are taking. DNTV Research's Bradley Park argues that amended safeguards are needed, and not a shutdown.
“The rational attack is to upgrade UI/UX, hazard disclosures, and LTV controls to negociate vulnerability safely,” Park told CoinDesk successful a note, noting that astir speech lending is successful stablecoins utilized to physique abbreviated positions.
He added that the regulator’s existent interest whitethorn beryllium market-structure distortions, specified arsenic the antagonistic kimchi premium, alternatively than the work itself.
Park said that transparency gaps besides complicate oversight: Bithumb discloses the standard of its lending activity, but Upbit, the country’s largest exchange, does not. That opacity could marque it harder for regulators to justice systemic risks and whitethorn beryllium a cardinal origin down the broad suspension.
“Until these structural issues are addressed, reopening whitethorn instrumentality time; precedence should beryllium knowing the mechanics and adopting a data-driven design, alternatively than broad restrictions,” helium concluded.
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