The FSC has just issued new guidelines on crypto lending services, prohibiting leveraged loans exceeding the value of collateral, capping interest rates at 20%.
South Korea Tightens Crypto Lending, Bans Leverage, Imposes 20% Interest Rate Cap
On September 5, the Financial Services Commission (FSC) of South Korea issued new guidelines for crypto lending services on centralized exchanges. This is a bold move to protect investors from potential risks from crypto lending products, in the context of an increasingly vibrant market.
South Korea caps lending crypto at 20% interest, bans leveraged loans https://t.co/Wg2Dn4Pmmy
— The Block (@TheBlock__) September 5, 2025
Why is this news important?
- Restrict excessive leverage and high-interest products, which Capital easily lead to the risk of total loss for users in Korea.
- Standardizing crypto lending activities, putting this service into a clear legal framework, is a reference for other countries to complete the law, including Vietnam , which is completing the legal framework for cryptocurrencies. Dunamu has signed a memorandum of cooperation with MB Bank to prepare for the launch of the first domestic digital asset exchange in Vietnam, which could become an important test for the application of domestic crypto management standards in the direction of transparency, safety and compliance with international practices.
- A solid legal basis and strict supervision are important factors to attract institutional Capital into the crypto market.
Main content of new regulation
- According to the official announcement, the new regulations include:
- Prohibits lending with leverage exceeding the value of collateral.
- Maximum interest rate cap of 20% for all crypto loans.
- Products that require cash refunds instead of crypto are banned and considered a violation of credit laws.
- Service providers must use their own Capital and cannot circumvent the law through a third party.
- Limit user loan amount based on experience and transaction history.
- Users must be notified prior to liquidation of collateral.
- Only applies to top 20 Token with the largest market Capital , or Token traded on at least 3 licensed exchanges in Korea.
- If a Token is labeled “warning” on exchanges, lending services for that Token must stop immediately.
Monitoring and implementation mechanism
The regulation takes effect from the date of publication.
Supervision and enforcement will be handled by the Digital Asset Exchange Alliance (DAXA) – an alliance of major exchanges in South Korea.
The FSC said it would XEM legalizing these regulations after evaluating the results of their actual implementation.
Major exchanges have been "whistled"
- Previously, on August 19, 2025, the FSC ordered domestic exchanges such as Upbit and Bithumb to suspend lending activities, after these platforms aggressively deployed crypto lending services.
- On July 4, Upbit launched a service that allows users to borrow up to 80% of the value of assets (KRW or crypto like USDT, BTC, XRP).
- Bithumb even lends up to 4 times the value of collateral.
- Several other exchanges quickly joined in, creating a booming “lending wave”.
- Analysts say this is a response to the Digital Asset Basic Act proposed by the ruling party of South Korea, which includes a provision to legalize lending services.
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