South Korea's financial regulator has mandated crypto exchanges to cease new digital asset lending services due to rising risks and significant user losses, including forced liquidations. The Financial Services Commission (FSC) sent letters to exchanges, instructing them to suspend offerings until comprehensive guidelines are established. While existing contracts will remain permissible, the FSC aims to introduce a regulatory framework addressing leverage limits, user eligibility, and risk disclosures for crypto lending. This decision follows alarming reports of losses among users, with approximately 3,635 individuals experiencing forced liquidations on one unnamed exchange alone. The volume reached about 1.5 trillion Korean won ($1.1 billion) within a month. The FSC noted that certain companies providing Tether lending services had caused increased selling pressure and unusual drops in USDT values. The new measures aim to prevent further damage to investor funds and respond to the broader legal inconsistency in the crypto lending market, which has operated without comprehensive regulations.

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