South Korea Caps Crypto Lending at 20% Interest, Bans Leveraged Loans
South Korea’s Financial Services Commission (FSC) has governing services provided by centralised platforms, including a cap on yahead interest rates and a ban on loans exceeding the value of a borrower’s collateral.
These regulations, which take effect on September 5, aim to protect individual and reduce speculative excess in the local cryptocurrency market.
Crypto Regulatory Overhaul Aims for Stability and Retail Protection
Under the new structure, cryptocurrency lending interest rates are strictly limited to 20% per year, and leveraged lending above collateral value is expressly prohibited. These measures follow the introduction of aggressive lending products by platforms like Bithumb and , which allowed users to borrow up to four times the value of their assets.
Borrower protection has been drastically increased by the move made by the . This is the first time borrowers must complete rigorous online training and pass a suitability exam administered by the industry’s self-regulatory authority, the Digital Asset platform Alliance. Loan limitations will also take into account the users’ trading experience and transaction history. Platforms must notify users of impending liquidations and allow capital additions to avoid forced exits.
Lending is currently restricted to in the top 20 by market capitalisation, or those listed on at least three local won-based platforms. Also, lending platforms must use their own funds for loans, with third-party partnerships barred to avoid regulatory evasion. The FSC emphasises that widespread “fiat repayment” loans violate and are no longer permissible.
Korea JoongAng reports that the legislation also requires real-time reporting of fee structures, loan volumes, and liquidation alerts, moves aimed at increasing transparency. These principles are designed first and foremost as self-regulatory standards, with the possibility of being incorporated into formal legislation later than an implementation assessment.
The FSC’s measured but rigorous approach matches South Korea with global trends. imposes comparable restrictions on digital asset services, but Singapore previously limited leverage for retail clients. Whereas the United States continues to navigate a disjointed mix of state regulations.
Local is currently strong with over 16 million South Koreans, nahead 30% of the population, being regular crypto users, demonstrating the need to preserve technological advancement and investor protection.
With the implementation of this new legislation, South Korea exhibits its leadership in cryptocurrency governance. The changes provide structural security for retail customers and establish standards for responsible innovation. How the market responds, and if technology develops without excessive risk will most likely affect worldwide policy acceptance.
