In response to increasing concerns regarding investor risk, the South Korean digital asset exchange, Bithumb, has adjusted the parameters of its crypto lending platform, which was launched a month prior. The modifications include decreasing the maximum leverage offered and significantly reducing the maximum loan amounts available.
According to news reports appearing in the South Korean publication, Kookmin Ilbo, Bithumb reactivated its crypto lending service on Monday. The service had been temporarily suspended on July 29 due to what the exchange described as “inadequate lending activity,”. source.
Bithumb stated that the changes were implemented “following a comprehensive evaluation of the entire service, and are designed to bolster investor safety and improve the overall user experience.” Specifically, the maximum allowable leverage has been halved, dropping from 4x to 2x. Additionally, the maximum individual loan amount has been reduced from 1 billion Korean won (approximately $726,000 USD) to 200 million Korean won (approximately $145,000 USD). This represents a substantial 80% decrease in the lending limit.
Reports indicate that this new lending ceiling is in effect for all users, irrespective of their past trading activity, even those whose cumulative trading volume over the previous three years exceeds 100 billion Korean won (roughly $72 million USD).
Related: XRP custody options now available for Korean institutions through BDACS amid rising demand
South Korea Establishes Crypto Lending Regulatory Group
On July 31st, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) in South Korea announced the creation of a specialized task force in collaboration with the Korea Institute of Finance and various domestic cryptocurrency exchanges. This group is mandated to formulate “Virtual Asset Lending Service Guidelines.”
The task force will consist of representatives from the FSC, FSS, and the Digital Asset eXchange Alliance (DAXA), the coalition of the nation’s five largest crypto exchanges. Their efforts will focus on developing a regulatory framework that incorporates global best practices, traditional stock market regulations, and the specific dynamics of the South Korean cryptocurrency market. Key areas of focus will include leverage limitations, the types of assets eligible for lending, and ensuring adequate risk transparency.
Regulators have also instructed exchanges to carefully re-evaluate any high-risk or legally questionable services they offer, particularly those involving high degrees of leverage or loans denominated in fiat currencies.
Prior to resuming its lending operations with the revised limits, Bithumb reportedly consulted with regulatory authorities regarding its service terms.
Cointelegraph contacted Bithumb for comments on these developments, however, a response was not received prior to publication.
Related: Central Bank of South Korea creates a new unit to oversee digital assets
Over 25% of Koreans Aged 20-50 Are Crypto Holders
According to a recent report from the Hana Institute of Finance, more than 25% of South Koreans between the ages of 20 and 50 currently own cryptocurrencies. On average, these digital assets comprise approximately 14% of their total financial investments. The highest rate of cryptocurrency adoption is observed among individuals in their 40s (31%), followed closely by those in their 30s and 50s.
Reports suggest that South Korean retail investors are increasingly reallocating capital from US-based Big Tech stocks towards investments in cryptocurrency-related assets. The proportion of net equity purchases attributed to these investors for the top 50 stocks shifted from 8.5% in January to 36.5% in June, before settling at 31.5% in July.
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