Financial Services Commission, Virtual Asset Lending 'Leverage Ban' [Crypto Briefing]

[Financial News] The lending service of virtual asset exchanges will be significantly restricted. High-risk leverage services that lend virtual assets exceeding the collateral value will be completely banned, and lending limits per investor will be set gradually.
The Financial Services Commission announced on the 5th that it will implement the 'Guidelines on Virtual Asset Lending' in the form of self-regulation by the Digital Asset Exchange Joint Consultative Body (DAXA). These guidelines are expected to lead to the legislation of related regulations in the future.
The biggest change is the complete ban on leverage services. High-risk lending products such as 'Lending Plus' and 'Coin Borrowing' provided by some won markets will be effectively phased out. Additionally, 'monetary lending services' that repay at the won value at the time of lending will be restricted due to potential violations of the Lending Business Act. Exchanges must operate lending services only with their own funds, and bypass services through cooperation or outsourcing with third parties are also prohibited.
To protect investors, the lending limit for virtual assets will be restricted step by step. Similar to the short-selling individual lending limit, it will be initially set at 30 million won and gradually adjusted up to 70 million won depending on investment experience and transaction history.
Investors using the lending service for the first time must pass online education and an eligibility test supervised by DAXA.
If the risk of forced liquidation increases during the lending period, a pre-notification obligation has also been established. If an investor tries to prevent forced liquidation by providing additional collateral, the exchange must allow it within the lending limit.
The range of lendable virtual assets will also be greatly restricted. Only virtual assets within the top 20 market capitalization or traded on three or more won exchanges can be lent. Items under trading caution or suspected of abnormal transactions are restricted from lending and collateral use. Exchanges must disclose the list of lendable virtual assets, balances, and collateral status in real-time on their website.
The lending service fee cannot exceed 20% per annum. This applies the maximum interest rate standard of other credit provision-related regulations. Exchanges must disclose the fee structure and the lending status of each virtual asset in real-time, and the forced liquidation status on a monthly basis.
A Financial Services Commission official stated, "Although this guideline is implemented as DAXA self-regulation, we plan to promptly promote the legislation of related regulations based on the operational progress in the future."

elikim@fnnews.com Kim Mi-hee Reporter