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Photo: Upbit |
[Alpha Biz= Kim Jisun] South Korea’s top financial regulators have expressed concerns over investor protection in crypto lending services that enable short selling, prompting major exchanges Upbit and Bithumb to scale back — but not shut down — their programs.
According to industry sources on August 2, both exchanges revised their lending services on July 29, less than a month after launching them. Upbit removed Tether (USDT), the most heavily borrowed asset, from its service, while Bithumb stopped accepting new users, citing depleted lending inventory.
The move came after the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) summoned executives from the country’s five largest crypto exchanges on July 25, warning that current lending services lack sufficient investor safeguards.
Launched earlier in July, Upbit’s “Coin Lending” and Bithumb’s “Lending Plus” services allowed users to borrow crypto assets using KRW or other tokens as collateral — effectively enabling margin trading and short positions similar to those in traditional equity markets. Bithumb even offered leverage of up to 4x.
Unlike margin trading on regulated securities markets, these services do not fall under the Capital Markets Act, leaving oversight and investor protections unclear.
While acknowledging regulators’ concerns, exchanges plan to maintain scaled-back lending operations until clearer guidelines are issued.
A Bithumb spokesperson said:
“The adjustment is aimed at ensuring stable operations. New users will be admitted once lending supply is replenished.”
An industry representative added:
“Rather than a complete shutdown, the service will evolve in line with regulatory guidance. This could include further restrictions on eligible users or additional safeguards for investors.”
Market watchers expect South Korean crypto lending services to continue in a reduced and tightly monitored form, pending a formal framework from financial authorities.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
