South Korea Clamps Down: Upbit & Bithumb Brace for Stricter Leverage Limits

Crypto giants Upbit and Bithumb are in regulators' crosshairs as South Korea tightens the screws on trading leverage—because what’s a bull market without some good old-fashioned government intervention?

Regulators wield the axe

The Financial Services Commission (FSA) is sharpening its knives, preparing to slash maximum leverage ratios across domestic exchanges. No more wild west margin trading—just when retail traders were starting to feel like hedge fund gods.

Exchanges between a rock and a hard place

Upbit’s compliance team is reportedly working overtime, while Bithumb’s legal department burns the midnight oil. Both face brutal fines if they fail to implement the new rules by Q4 2025—because nothing says 'market stability' like threatening billion-dollar companies with penalties that amount to parking tickets.

The irony isn’t lost on traders

Meanwhile, decentralized protocols continue offering 100x leverage with zero KYC—proving once again that regulation just pushes innovation offshore. But hey, at least Korean bureaucrats can sleep soundly knowing they’ve 'protected' investors from themselves.

Key Insights:

• South Korea forms task force to regulate crypto lending.
• Upbit and Bithumb offer high-leverage loan products.
• New rules will cap leverage and boost transparency.
• Central bank expands oversight with Virtual Asset Committee.

South Korea’s financial watchdogs have ordered the country’s top crypto exchanges to dial back newly launched high‑leverage lending services.

Upbit is the nation’s largest crypto exchangeh. It handles roughly 70% of trading volume and over $7 billion in daily trades. The second‑ranked Bithumb were told to curb loans enabling leverage.

On July 4, 2025 Bithumb began offering loans on 10 cryptocurrencies including Bitcoin, Ethereum, XRP and Tether with up to 4× leverage.

Upbit introduced a similar loan product the same day for three coins (Tether, Bitcoin and XRP). The services let traders borrow crypto or cash against their holdings, effectively enabling short‑selling.

On July 25 the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) summoned executives from five major exchanges to express concern.

They warned that Bithumb’s fourfold leverage far exceeds the 2:1 margin cap in Korea’s stock market and flagged legal ambiguities and systemic risk in the new products.

In particular, regulators noted that lending of stablecoins like Tether could fall under consumer‑loan regulations, raising compliance questions.

Exchanges quickly responded. Upbit halted its USDT (Tether) lending on July 28, citing concerns it could violate Korea’s lending laws.

Bithumb restructured its service on July 29 but kept the 4× loan ratio intact. The second exchange said it had “depleted” its lending supply and has temporarily stopped accepting new loan applications.

Regulators said they will FORM a joint task force with the industry to draft voluntary rules for crypto lending and margin trading.

Task Force to Set Crypto Lending Guidelines

Indeed, officials have already set a formal process in motion. On July 31 the FSC announced a joint task force (with the FSS and representatives of the Digital Asset eXchange Alliance) to develop a crypto‑lending regulatory framework.

The panel will review international best practices and stock-market standards before issuing official guidance. Draft rules expected in August will cover maximum leverage ratios, eligible assets and investors, and mandatory risk disclosures for lending products.

Authorities have instructed exchanges to review any offerings with “excessive leverage” or other legally vague features for compliance gaps.

Crypto Regulatory Background in South Korea

The leverage crackdown follows years of tightening crypto oversight. In 2018 the government banned anonymous trading by enforcing “real‑name” bank accounts for crypto transactions.

A 2020 amendment, effective March 2021, then required all virtual‑asset platforms to register with regulators, secure an information‑security (ISMS) certification and expand AML/KYC controls.

Under those rules, only four exchanges – Upbit, Bithumb, Coinone and Korbit – secured the needed approvals to keep operating.

In July 2024 Korea enacted the VIRTUAL Asset User Protection Act, its first dedicated crypto law. The FSC says the law’s goal is to “establish a sound order in the virtual asset market and ensure protection for users,” and it reported that exchanges had already bolstered compliance systems in anticipation.

The law mandates segregated customer wallets, insurance cover and stiff penalties for market abuse. Taken together, the proposed leverage limits WOULD extend Korea’s cautious policy by aligning crypto lending with conventional finance safeguards.