As of August 19, 2025, the Financial Services Commission of South Korea (FSC) officially ordered all cryptocurrency exchanges to suspend cryptocurrency lending operations. The reason is legal risks, high volatility, and an increase in liquidations amid an unstable market.
📊 What happened?
- The FSC has identified an increase in liquidations on platforms offering margin and credit products
- Exchanges are required to temporarily disable lending features and notify clients
- Some platforms, including Upbit and Bithumb, have already begun revising their terms of service
- The development of a new regulatory package for DeFi products is expected
🧠 Why is this important?
- South Korea is one of the largest crypto markets in Asia, and its decisions often set the tone for the region
- DeFi platforms may lose some liquidity, especially in the lending segment
- Investors are receiving signals of increased regulatory pressure, especially on high-risk products
- Exchanges are forced to adapt, which may lead to new forms of lending — more transparent and regulated
📈 How does this affect the market?
- Volumes on Korean exchanges have decreased by 8–12% over the week
- Some tokens related to lending (e.g., AAVE, COMP) have shown short-term declines
- At the same time, there is growing interest in staking and RWA as more stable forms of income
- Institutional investors welcome the FSC's move as a 'step towards maturity'
The FSC's decision is not just a ban, but a reboot of the approach to crypto-lending. DeFi must adapt to survive in the new regulatory environment. And if Asia starts to bring order — the global market will not remain on the sidelines.
