South Korea’s prime monetary regulator ordered crypto exchanges to droop new digital asset lending companies, citing mounting dangers and highlighting a necessity for clear guidelines.
The Monetary Providers Fee (FSC) said on Tuesday that it despatched letters to exchanges requesting the suspension of recent crypto lending till it completes pointers. Current contracts, like repayments and maturity extensions, shall be permitted.
On July 31, the FSC and the Monetary Supervisory Service (FSS) introduced that they had formed a joint task force to develop a regulatory framework for crypto lending. The rules are anticipated to cowl leverage limits, person eligibility and danger disclosures for digital asset lending actions.
The FSC stated it might conduct on-site inspections and take supervisory motion towards platforms that didn’t comply.
Pressured liquidations spotlight pressing want for clear guidelines
The transfer follows stories of widespread person losses, together with hundreds of compelled liquidations in exchange-run lending packages.
One unidentified change drew about 27,600 customers in a month after launching a lending service in mid-June, the FSC stated. The platform recorded about 1.5 trillion Korean received ($1.1 billion) in quantity. Of these customers, about 13%, or 3,635 folks, suffered compelled liquidations as their crypto positions fell in worth.
The FSC additionally pointed to 2 corporations that supplied Tether (USDT) lending companies, which triggered a surge in promoting quantity and an uncommon decline in USDT costs. The company stated persevering with new lending operations with out safeguards may additional injury investor funds.
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Crypto lending a grey space in South Korea
Since 2020, South Korea has laid foundational regulatory groundwork for digital asset service suppliers (VASPs).
This consists of Anti-Cash Laundering (AML) and Journey Rule mandates underneath the revised Act on Reporting and Utilizing Specified Monetary Transaction Info.
In 2023, the nation’s Digital Asset Person Safety Act got here into power, making a authorized foundation for penalties towards unfair actions like market manipulation and mishandling of person deposits.
Regardless of these, crypto lending has remained in a authorized grey zone, working with out clear regulatory frameworks or a licensing regime.
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