User-Specific Lending Limits Differentiated… Coin Lending Also Restricted
(Seoul = Yonhap News) Reporter Im Soo-jeong = Leverage services and monetary lending services associated with virtual asset lending, which pose significant user risk, will be banned.
On the 5th, the Financial Services Commission announced that they have established virtual asset guidelines containing these details, which will be applied from today.
There have been concerns that virtual asset lending services utilizing leverage could lead to significant losses for users due to price fluctuations.
Cryptocurrency exchange Bithumb introduced a service allowing users to borrow up to four times their assets or Korean won as collateral, and Upbit also launched a service that lends up to 80% using deposits in Korean won or digital assets, targeting three assets: Tether, Bitcoin, and Ripple.
In response, the guidelines clearly define the scope of virtual asset lending services. Financial and monetary lending services that may violate the Lending Business Act, alongside leverage services, are restricted.
The guideline prohibits lending of virtual assets exceeding collateral value or calculating repayments based on the Korean won value standard.
User protection measures have also been added.
Firstly, user-specific lending limits are set based on lending service usage experience and transaction history, similar to short selling in the stock market.
Like the personal loan limit for short selling, maximum limits are set in stages, such as 30 million KRW and 70 million KRW, and are to be regulated internally by each service provider.
If there is a risk of forced liquidation during the lending period, users must be notified in advance.
Additionally, lending service fees should not exceed the maximum legal annual interest rate of 20% related to credit offerings, and there is an obligation to disclose the fee structure and the status of virtual asset lending (in real-time), as well as forced liquidation status (monthly).
Measures to prevent market shocks have also been included.
Lendable virtual assets are restricted to those within the top 20 by market capitalization or those supported for trading on three or more won-based exchanges.
To prevent excessive price fluctuations caused by concentrated lending demand for specific assets, obligations to establish internal control measures have been imposed.
This guideline will initially be implemented in the form of self-regulation by the Digital Asset Exchange Association (DAXA).
Based on the content and operational performance of these guidelines, they plan to quickly pursue related regulatory legislation in the future.