South Korean Regulators Enforce Strict Crypto Lending Caps Amid Rising Investor Losses

South Korea's Financial Services Commission (FSC) has implemented comprehensive new regulations to curb risks in the crypto lending sector, including a cap on interest rates at 20% annually and a ban on leveraged loans exceeding collateral value. These measures are aimed at protecting investors and stabilizing the market after exchanges like Upbit and Bithumb offered excessively risky lending products, resulting in widespread liquidations and significant losses for thousands of investors. The new rules require exchanges to fund loans using their own capital, restrict lending to the top 20 cryptocurrencies or those listed on multiple local exchanges, and prohibit indirect lending through third parties. First-time borrowers must complete mandatory training and aptitude tests, and lending limits will be adjusted based on user experience and transaction history. Early warning systems for liquidation risks are also mandated to prevent sudden losses, with full disclosure of loan statuses required. While some exchanges paused lending services to comply, the regulations are expected to enhance market trust and attract institutional investors by establishing clearer and safer operational standards.