Seoul Watchdogs Sound Alarm on Upbit, Bithumb Crypto Lending Products

Key Points

1. The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have expressed concerns over high-risk lending products from Upbit and Bithumb, particularly their leverage ratios exceeding the 2:1 limit set for traditional finance.

2. Bithumb offers a lending service with leverage ratios up to 4:1, while Upbit launched a similar platform supporting Tether, Bitcoin, and Ripple, which regulators argue may contravene Korea’s Lending Business Act.

3. Following regulatory pressure, Upbit discontinued its Tether lending service, and Bithumb temporarily suspended new lending applications due to exhausted inventory, though it retained its 4:1 leverage structure.

4. Regulators plan to establish an industry collaborative task force to address these issues, emphasizing consumer protection and potential adjustments to existing regulatory constraints.

5. South Korea is considering reversing a 2018 classification that excluded blockchain-related firms from government-backed financing programs, which could legitimize crypto ventures like Upbit’s parent company, Dunamu.