South Korea has temporarily suspended new crypto lending services due to concerns over user protection after a significant liquidation event at the Bithumb exchange. In June, over 27,000 customers utilized lending services, and 13% faced liquidation as market prices changed. The Financial Services Commission (FSC) cited insufficient protections and potential harm to market order as reasons for the suspension, which will remain until clear guidelines are established. Experts suggest that this move signals tighter oversight of leverage and retail risk rather than a complete ban. The accumulation of leverage in the crypto market has raised global concerns, with reports showing a rise in the value of crypto-collateralized borrows and on-chain lending. Analysts highlight that high leverage contributes to market fragility, especially amid ongoing speculative enthusiasm and a trend of increased liquidations, particularly in the altcoin segment. This regulatory action may outline a path for other nations facing similar challenges related to crypto trading risks.

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