South Korean financial authorities warn about the risks of leveraged investment in virtual asset exchanges

ChainCatcher news, according to Yonhap News Agency, the Financial Services Commission and the Financial Supervisory Service of South Korea convened executives from five virtual asset exchanges on July 25 to express concerns about the cryptocurrency lending services recently launched by Upbit and Bithumb, pointing out legal disputes, insufficient user protection measures, and that leveraged investments could affect the operators' stability.

Previously, Bithumb launched a service on the 4th that allows borrowing up to 4 times the cryptocurrency against assets or Korean won, supporting 10 types of cryptocurrencies; Upbit launched a service on the same day for 3 types of coins, with a maximum borrowing limit of 80%. Such services allow investors to use short-selling strategies, especially Bithumb's leverage of up to 4 times, raising concerns about insufficient user protection measures, as the maximum leverage for ETFs in the South Korean stock market is only 2 times.

After the authorities convened the meeting, Upbit suspended USDT lending services on the 28th, and Bithumb adjusted its lending services on the 29th, currently not accepting new applications due to exhausted limits. Given the ongoing controversy, the financial authorities decided to form a special working group with the industry to develop self-regulatory rules.