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South Korean Regulators Warn of Crypto Lending and Margin Trading Risks Amid Exchange Self-Regulation Push

South Korea’s financial regulators have issued stark warnings about significant risks tied to cryptocurrency lending and margin trading services. Authorities specifically highlighted concerns over the high-leverage exposure inherent in these products, emphasizing potential investor vulnerabilities.

Leading domestic exchanges including Upbit and Bithumb are now collaborating with regulators to develop voluntary self-regulation frameworks. This industry-led initiative aims to preemptively address consumer protection gaps and mitigate systemic threats associated with leveraged crypto products.

Regulators additionally signaled that stablecoin lending could fall under Korea’s Lending Business Act regulatory scope. This classification consideration stems from the interest-bearing nature of such services, which parallels traditional financial lending activities.

Officials cautioned that excessively stringent regulations might inadvertently drive users toward unregulated offshore platforms. Such migration could potentially undermine domestic oversight efforts and reduce local market transparency.

The development aligns with South Korea’s broader effort to tighten cryptocurrency sector supervision. As part of this regulatory trajectory, authorities plan to approve spot cryptocurrency exchange-traded funds (ETFs) before the conclusion of 2025.

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