The Financial Services Commission (FSC) of South Korea officially
published
new regulatory guidelines for cryptocurrency lending on centralized
exchanges, effective September 5th.
According to the FSC, this framework is designed to bolster investor
protections, incorporating insights from international best practices. A
key provision restricts leveraged loans to the value of the provided
collateral. Furthermore, a 20% annual interest rate cap is enforced.
Lending services are now prohibited from demanding loan repayment in
traditional fiat currencies, as the regulator considers this a violation of
existing lending regulations. Loan issuance must be funded exclusively by
the lending company’s own capital, with a ban on using third-party
arrangements to bypass these rules.
Loan limits are imposed on each client, calibrated according to their
experience level and past trading activity. Exchanges must transparently
inform users about the potential risks associated with position liquidations
beforehand.
Cryptocurrency lending is restricted to the top 20 digital assets based on
market capitalization or those listed on at least three domestic exchanges.
If a platform issues a “warning” designation to an asset, lending for that
particular cryptocurrency must be immediately suspended.
The South Korean Digital Asset Exchange Alliance will be responsible for
overseeing adherence to these new guidelines. The FSC intends to
formalize these standards into law at a later date.
Back in August, the regulatory body
mandated
a temporary suspension of crypto lending services for all local exchange
platforms.
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