South Korea Cracks Down on Crypto Lending Risks: New 2025 Guidelines Explained

• Why Is South Korea Tightening Crypto Lending Rules?
• What Are the Key Pillars of the 2025 Guidelines?
• How Do the Rules Address Past Failures?
• What’s Next for Exchanges?
• FAQs: South Korea’s Crypto Lending Rules

South Korea’s Financial Services Commission (FSC) has rolled out stringent guidelines to rein in the volatile crypto lending sector, aiming to prevent investor losses and market instability. The rules, effective as of September 2025, ban Leveraged lending, cap fees, and mandate user protections like mandatory training and collateral safeguards. This move follows reports of forced liquidations and price manipulation, with the FSC warning exchanges to comply or face penalties. Here’s a deep dive into what’s changing—and why it matters.

Why Is South Korea Tightening Crypto Lending Rules?

In July 2025, the FSC flagged crypto lending as a "high-risk regulatory vacuum" after thousands of investors faced forced liquidations. One exchange, for instance, saw 3,635 users lose positions worth $1.1 billion in a single month. "Unchecked lending operations are a recipe for disaster," an FSC official stated. The new guidelines aim to curb reckless practices while balancing innovation with accountability.

What Are the Key Pillars of the 2025 Guidelines?

The FSC’s framework targets three areas:

• Service Scope Restrictions: Leveraged lending exceeding collateral value is banned, as is Korean won (KRW) lending. Exchanges like BTCC must use their own assets—no third-party consignment allowed.
• User Protections: First-time lenders must complete DAXA’s training and aptitude tests. Loan limits range from ₩30M to ₩70M based on experience. Forced liquidations now require advance notice and options for additional collateral.
• Market Stability: Only top 20 market-cap assets or those listed on three+ KRW exchanges qualify for lending. Stocks under trading restrictions are excluded.

How Do the Rules Address Past Failures?

The FSC cited two cases where Tether (USDT) lending triggered abnormal sell-offs and price drops. "Without safeguards, investor funds are at mercy of volatility," noted a BTCC analyst. The 20% annual commission cap and mandatory loan disclosures aim to prevent such scenarios.

What’s Next for Exchanges?

Exchanges have until Q4 2025 to comply. The FSC plans on-site inspections, with non-compliant platforms facing sanctions. DAXA, which co-drafted the guidelines, will monitor self-regulation efforts. "Legislation will follow operational results," the FSC added, hinting at future laws.

FAQs: South Korea’s Crypto Lending Rules

What triggered the new guidelines?

Reports of mass forced liquidations and market manipulation, including a June 2025 case where 13% of users on one platform lost their collateral.

Can exchanges still offer leveraged lending?

Only if collateral covers 100% of the loan value. Over-leveraging is now prohibited.

How do the rules impact small investors?

Loan limits and training requirements aim to protect novice users, but critics argue caps may limit earning potential.