Financial Authorities "Suspend New Operations of Virtual Asset Lending Service" [Crypto Briefing]

[Financial News] The financial authorities initiated administrative guidance on the 19th to temporarily suspend new operations of virtual asset lending services by virtual asset exchanges. The service of lending virtual assets to users using virtual assets or deposits as collateral is considered a high-risk investment product utilizing leverage, according to the authorities.
According to the Financial Services Commission and the Financial Supervisory Service, in the case of Company A's virtual asset lending, approximately 27,600 investors used the service for a month from mid-June, with the usage amount reaching 1.5 trillion won. Among them, 13%, or 3,635 people, experienced forced liquidation. Forced liquidation occurs when the price of the lent virtual asset moves contrary to expectations, resulting in margin losses and the forced termination of the lending position. In other words, more than 1 in 10 people suffered losses.
The issue of market order disruption also emerged. After Company A and Company B started USDT (Tether) lending services, the selling volume surged, causing the USDT price on the exchange to fall unusually. Typically, the domestic USDT price is higher than overseas, but after the introduction of the lending service, it even fell below the overseas price.
In response, the financial authorities sent an administrative guidance document requesting the suspension of new operations of virtual asset lending services until specific guidelines are prepared. Repayment or maturity extension for investors currently using the lending service is still allowed.
A financial authority official stated, "If user damage concerns continue due to the continuation of new operations even after this administrative guidance, we plan to implement comprehensive measures for user protection, such as on-site inspections of the relevant business operators," adding, "We also plan to quickly prepare guidelines related to virtual asset lending to resolve business uncertainties and protect users."

elikim@fnnews.com Kim Mi-hee Reporter