Bithumb Slashes Crypto Lending Leverage – Safety First or Growth Last?

South Korea's crypto giant Bithumb just tightened the screws on leveraged lending—protecting investors or stifling gains?

Risk management or revenue suicide? The exchange's move comes amid global regulatory pressure, but traders are left wondering if this is genuine consumer protection or just CYA compliance theater.

One thing's certain: when exchanges start cutting leverage, the degens start sweating. Maybe try actually investing instead of gambling with 100x next time?

Seoul’s top crypto platform, Bithumb, has sharply scaled back its coin-lending service only a month after introducing it.

On July 4, Bithumb launched its much-anticipated lending program, offering loans with 4x leverage on ten major cryptocurrencies, including Bitcoin, Ethereum, Ripple, and Tether. Borrowers could use either crypto or Korean won as collateral.

But the rollout didn’t last long.

Bithumb Cuts Leverage, Loan Limits 

As per a report from Kookmin Ilbo, Bithumb paused the service on June 29 due to low lending volume. After a full internal review, it resumed on July 8 but with tighter conditions.

• Leverage was cut from 4x to 2x
• The maximum loan amount was reduced by 80%, from 1 billion won to just 200 million won

Now, even investors with over 100 billion won ($72 million) in trading volume over the past three years can only borrow up to 200 million won through Bithumb’s lending service.

Regulators Push for Safer Crypto Lending

Bithumb’s recent changes come after Korean regulators raised alarms about risky high leverage in crypto lending. On June 31st, financial authorities and crypto exchanges teamed up to create safer rules for lending. They aim to set clear leverage limits, define eligible assets, and ensure transparent risk disclosure.

They also warned that, with a lack of user understanding, high leverage could cause major losses if crypto prices fluctuated sharply. 

After talks with financial authorities, Bithumb decided to review and lower its service limits before restarting coin lending. Meanwhile, Upbit has removed Tether from its lending service due to legal concerns. 

Industry insiders expect new virtual asset lending rules to be released soon, likely including strict limits on Leveraged coin trading, similar to stock market regulations.

Investors Shift from Big Tech to Crypto Stocks

Alongside these changes, South Korean retail investors are shifting from U.S. Big Tech stocks to crypto-related shares, especially those tied to stablecoins. From January to April, monthly Big Tech buys averaged $1.68 billion but dropped sharply to $260 million by July. 

Meanwhile, crypto stocks surged, making up 36.5% of the top 50 purchases in June. This shift is driven by growing stablecoin use and the impact of the recently introduced US GENIUS Act.