Cryptocurrency leveraged loans in South Korea are now prohibited, with a maximum interest rate of 20% established.
In a bid to increase transparency and protect users, South Korea's Financial Services Commission (FSC) has introduced a series of new regulations for cryptocurrency lending. The regulations aim to create a barrier to entry for uninformed speculators and ensure a safer environment for legitimate investors.
Advance Warnings and Additional Collateral
Exchanges are now obligated to provide users with advance warnings of impending forced liquidations. This gives users the opportunity to post additional collateral to avoid such events.
Mandatory Training and Qualification Test
First-time borrowers on cryptocurrency exchanges will have to complete a mandatory online training module and qualification test, administered by DAXA. This is intended to educate new users about the risks associated with cryptocurrency lending.
Public Disclosure of Data
Exchanges are compelled to publicly disclose real-time data on lending volumes per token, available balances, and collateral status. This transparency is designed to give users a clearer understanding of the market conditions.
Tiered Lending Limit System
The FSC has introduced a tiered lending limit system based on an individual's trading history and experience. This system sets borrowing caps in stages, such as 30 million won or 70 million won, mirroring the risk-based approach used in traditional stock short selling.
Regulated Cryptocurrencies
The guidelines restrict lending to a curated list of cryptocurrencies. Specifically, these are those ranked within the top 20 by market capitalization or those listed on at least three Korean won-based exchanges.
Monthly Reports on Forced Liquidations
Monthly reports on forced liquidations are also required to be published. This will provide users with insights into the number of forced liquidations that have occurred and the reasons behind them.
Prohibition on Shadowy Third Parties
The FSC's guidelines prevent platforms from sourcing assets from shadowy third parties. This is intended to ensure that all assets used for lending are traceable and legitimate.
Non-EU Stablecoins in Europe
In a related development, ECB President Christine Lagarde has stated that non-EU stablecoins will not receive a free pass in Europe. This suggests that similar regulations may be introduced in the EU in the future.
Unspecified Bitcoin-Based Cryptocurrencies
The search results do not specify which bitcoin-based cryptocurrencies are listed under South Korea's new crypto lending regulations. Users are encouraged to check with their respective exchanges for more information.
In conclusion, these new regulations are a significant step towards creating a safer and more transparent cryptocurrency lending market in South Korea. By providing users with more information and protecting them from unscrupulous practices, the FSC is helping to build trust in the cryptocurrency industry.
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