Bithumb, one of South Korea’s largest and most well-known cryptocurrency exchanges, has announced a major reduction in its crypto lending services in response to growing regulatory pressure. This change marks a significant moment for the Korean crypto industry, as it reflects the increasing influence of financial authorities on exchange operations. The decision also underscores the regulators’ push for a safer, more transparent trading environment that prioritizes investor protection over aggressive growth strategies.
Massive Reductions in Lending Limits
The exchange’s updated lending framework includes two key changes. First, maximum leverage has been reduced from 4× to just 2×, cutting traders’ borrowing capacity in half. Second, the lending cap has been slashed by 80%, dropping from 1 billion KRW (about $718,000) to 200 million KRW (around $143,600).
These adjustments are intended to reduce the risks associated with high leverage. In volatile markets, excessive borrowing can lead to rapid losses, margin calls, and mass liquidations. By limiting leverage and capping lending volumes, Bithumb aims to protect users from excessive risk exposure while ensuring market stability.
Temporary Suspension and Thoughtful Resumption
Bithumb’s lending services were temporarily suspended on July 29, with low transaction volumes cited as the reason. However, the pause also gave the exchange time to review its lending policies in light of rising regulatory expectations.
Services resumed on August 8, but only after what Bithumb described as a “comprehensive review” of its lending program. The new terms are designed to strengthen investor protections and enhance the overall service quality. Notably, the stricter limits now apply even to “qualified investors” — those with lifetime trading volumes above 100 billion KRW — showing that the changes affect both retail and institutional participants.
Regulatory Pressures Mount
Although Bithumb has not publicly identified the authorities involved, industry sources suggest the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) are behind the push for reform. These agencies have expressed concern about the risks tied to high-leverage products, market volatility, and the absence of clear legal guidelines for crypto lending.
The policy overhaul also follows a meeting between regulators and South Korea’s five largest fiat-trading crypto exchanges. The discussion centered on the risks of margin-based lending and the need for stronger investor safeguards. Upbit, another major exchange, responded by removing USDT from its lending products, further illustrating the scope of the regulatory impact.
Industry experts expect the FSC and FSS to release detailed crypto lending guidelines by the end of the month, potentially mirroring rules already in place for the country’s equity markets.
Broader Industry Implications
Bithumb’s swift response is part of a broader industry trend toward compliance-focused operations. The simultaneous policy changes at both Bithumb and Upbit demonstrate how quickly leading exchanges are adapting to align with regulatory expectations.
For traders, the new restrictions may limit certain aggressive strategies, but they also add a layer of protection against extreme market swings. Over the long term, these changes could help build investor trust, attract institutional capital, and strengthen South Korea’s position as a regulated, stable crypto market.
Conclusion
Bithumb’s move from high-leverage, large-scale lending to a leaner and more controlled structure is a direct response to regulatory pressure. As the Korean crypto market evolves, exchanges are balancing innovation with oversight, signaling a future where investor protection and compliance are at the heart of industry growth.
