The South Korean Financial Services Commission (FSC) has announced new rules for crypto loan services offered through central exchange.
South Korea introduces new regulations on crypto loans: interest rate cap 20%
The committee said in a press release that the regulations “aim to enhance user protection, taking into account global examples.”
Under the new regulations, leveraged drones exceeding the collateral value are prohibited. Additionally, there is a 20% cap on crypto loan interest rates. Products that require users to repay cash are also prohibited because they violate credit regulations.
The FSC stressed that companies providing these services may only use their own capital and are not permitted to indirectly circumvent the rules through third-party services. User credit limits are determined based on transaction history and experience. Additionally, investors must notify them before liquidation risk.
The new rules apply only to cryptocurrencies in the top 20 cryptocurrencies by market capitalization, or cryptocurrencies traded on at least three licensed local exchanges. If cryptocurrency is classified as “caution”, the lending service for that asset will also be suspended.
Regulations are in effect today, and compliance is supervised by the Association of Digital Asset Exchanges (DAXA). The FSC plans to transpose rules into legal regulations based on implementation results.
The move follows last month’s FSC order, which will halt lending services to Upbit, Bithumb and other exchanges.
*This is not investment advice.