South Korean Financial Services Commission (FSC) He has ordered the exchanges that suspend the new cryptographic loan products until formal guidelines are instead, citing growing risks for users and market stability.
The regulators indicated a recent incident in Bithumb, where more than 27,000 clients took advantage of loan services in June, with 13% forced to liquidation after the collateral values balancing against them.
The FSC movement occurs days after Galaxy Digital analysts published a report in which they marked the growing amount of influence on cryptography markets as a concern.
The administrative guide, of the FSC, allows existing loans to execute its course, but prohibits the deployment of new loan services. The authorities said that if the platforms ignore the directive, inspections will follow and other supervision actions. Formal loan guidelines are expected in the coming months.
Korea repression lands when cryptography use increases worldwide towards bull market levels. Galaxy’s report shows that crypto-collateralized loans increased 27% in the second quarter to $ 53.1 billion, the highest since the beginning of 2022.
The liquidation wave of $ 1 billion last week, caused by Bitcoin withdrawal from $ 124,000 to $ 118,000, highlighted the speed with which exaggerated bets can relax.
Analysts warn that stress points are already shown throughout the system: defi liquidity abdominals, ETH exit queues and wide extensions between loan rates in dollars in chain and free sale.
However, not everyone agrees with the approach that the Korean authorities are adopting. Bradley Park by DNTV Research argues that better safeguards are needed and not a closure.
“The rational approach is to update UI/UX, dissemination of risks and controls of LTV to administer the exposure safely,” Park told Coinridesk in a note, pointing out that most exchange loans are used in stable used to build short positions.
He added that the regulator’s true concern can be market structure distortions, such as Kimchi’s negative premium, instead of the service itself.
Park said that transparency gaps also complicate supervision: Bithumb reveals the scale of its loan activity, but the UPBIT, the largest exchange in the country, does not. That opacity could make regulators judge systemic risks and can be a key factor behind the general suspension.
“Until these structural problems are addressed, reopening can take time; priority must be to understand the mechanism and adopt a data -based design, instead of general restrictions,” he concluded.
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