- To meet regulatory requirements, Bithumb reduces maximum loan limits by 80% and leverage from 4x to 2x.
- A task force is formed by South Korean regulators to create rules for lending services including virtual assets.
- More than 25% of South Koreans between the ages of 20 and 50 possess cryptocurrency, with those in their 40s owning the most.
Following a brief suspension and regulatory review, South Korean cryptocurrency exchange Bithumb has reopened its crypto lending service with much lower leverage and loan restrictions.
The South Korean newspaper Kookmin Ilbo said that the exchange slashed the maximum loan amount from 1 billion won ($726,000) to 200 million won ($145,000), an 80% decrease, and decreased its maximum leverage ratio from 4x to 2x. All users are subject to the new cap, including those who have traded more than 100 billion won ($72 million) in total during the previous three years.
Citing “insufficient lending volume,” Bithumb stopped its month-old lending product on July 29. Before resuming operations, the exchange claimed to have implemented “extensive” changes to safeguard investors and enhance service quality.
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Bitcoin price in KRW on Bithumb showing July 29 suspension of crypto lending and August 12 resumption with 2x leverage and 80% lower loan limits.
The action comes after increased scrutiny from the Financial Supervisory Service (FSS) and Financial Services Commission (FSC) of South Korea, which on July 31 established a joint task force with the Korea Institute of Finance and the Digital Asset eXchange Alliance (DAXA), which represents the top five exchanges in the country.
Regulatory coordination and South Korea’s crypto ownership trends
The task force’s goal is to establish guidelines for the Virtual Asset Lending Service that address risk disclosure, asset eligibility, and leverage limitations. It will make use of international norms, stock market regulations, and the unique requirements of the cryptocurrency industry in South Korea. Exchanges have also been pushed by regulators to examine services that are high-risk or legally ambiguous, especially those that involve excessive leverage or loans based on fiat currency.
According to the report, Bithumb worked with authorities prior to enacting its updated loan conditions.Trends in Crypto Ownership in South Korea
More than 25% of South Koreans between the ages of 20 and 50 own cryptocurrencies, accounting for an average of 14% of their total financial portfolio, according to the Hana Institute of Finance. People in their 40s have the greatest ownership rates (31%), followed by those in their 30s and 50s.
Retail investors in South Korea have also been switching from Big Tech firms in the United States to stocks tied to cryptocurrency. From 8.5% in January to 36.5% in June and then to 31.5% in July, their proportion of the top 50 net-bought stocks increased.
