South Korea's Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have summoned executives from the country's top five cryptocurrency exchanges, raising serious concerns about recently launched lending and margin trading services by Upbit and Bithumb. The regulatory intervention came after both exchanges introduced products on July 4, 2025, allowing users to borrow digital assets with up to 4x leverage, significantly higher than the 2:1 limit permitted in traditional Korean equity markets.
Bithumb's service enabled borrowing across 10 cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Tether (USDT), while Upbit offered similar functionality for BTC, XRP, and USDT. Regulators specifically targeted mechanisms enabling short-selling through borrowed funds, warning these high-leverage products operate with insufficient investor safeguards in volatile crypto markets.
In response, Upbit suspended its Tether lending service on July 28, citing potential violations of Korea's Lending Business Act, while Bithumb modified its platform structure but maintained controversial 4x leverage ratios. Ben Ko, CEO of Catalyze Research, noted regulators likely view stablecoin lending as 'consumer lending', adding that "parts of Korea's crypto market may be operating outside the guardrails typical of traditional financial risk management."
The FSC and FSS are establishing a joint task force with exchanges to develop voluntary self-regulation policies. Experts warn stricter rules could push users to offshore platforms with weaker compliance, potentially undermining Korea's ability to protect investors and shape its crypto market. This crackdown coincides with broader regulatory shifts, including the Bank of Korea expanding its crypto oversight role and exploring deposit tokens on public blockchains.