South Korea just slammed the brakes on crypto lending after things got completely out of hand. The country’s financial watchdog imposed a strict 20% interest rate cap and banned all leverage lending that exceeds collateral value, effectively ending the wild west period of crypto borrowing.
The move comes after some pretty scary numbers emerged from recent inspections. In just one month, around 27,600 investors borrowed a staggering $1.1 billion worth of crypto, and 13% of them got liquidated when prices moved against them. That’s thousands of people who lost their shirts because exchanges were offering crazy lending terms.
The whole mess started when exchanges began competing with increasingly risky products. Upbit was letting people borrow up to 80% of their deposit values, while Bithumb went completely overboard by offering loans worth four times what customers actually owned. It was basically a recipe for disaster.
Regulators had to step in on August 18 and temporarily shut down all crypto lending services while they figured out what was going on. What they found was alarming – people were borrowing way more than they could afford to lose, and market volatility was wiping them out left and right.
The new rules are pretty comprehensive too. No more lending that exceeds collateral value, mandatory training for first-time borrowers, and strict limits on how much people can borrow based on their experience.
Conclusion
South Korea capped crypto lending at 20% interest and banned over-collateralized loans after 27,600 investors borrowed $1.1 billion with massive liquidation losses.
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