South Korea’s Financial Services Commission (FSC) has ordered local digital asset exchanges to temporarily suspend crypto lending operations.
The regulator issued administrative guidelines to platforms to wind down such services starting from August 19, until the country establishes an appropriate regulatory framework for the sector.
Extensions of existing contracts and repayments are permitted. The FSC stated it will conduct inspections and take action against platforms that do not comply with the requirements.
This move follows reports of significant losses among users, including thousands of cases of forced liquidation under crypto exchange lending programs.
According to the FSC, one unnamed platform attracted approximately 27,600 users within a month of launching its lending service. It is likely referring to Upbit or Bithumb.
The trading volume on the platform was about 1.5 trillion Korean won (~$1.1 billion). Approximately 13% of clients, or 3,635 individuals, faced forced liquidation due to the decline in the value of their cryptocurrency positions.
The regulator added that shortly after exchanges introduced lending services in USDT, a surge in sell orders led to a drop in the stablecoin’s price on the platforms, causing disruptions.
Upbit and Bithumb had already suspended their services, although the latter later resumed them under stricter conditions.
In late July, the Bank of South Korea established a new unit to monitor the crypto market.