Bithumb Scales Back Lending Services Amid Regulatory Scrutiny
In response to ongoing scrutiny from financial regulators, Bithumb, a prominent South Korean cryptocurrency exchange, has dramatically scaled back its lending services. Reports from the Kookmin Ilbo reveal that the platform has decreased its leverage ratio from 4x to 2x and has also cut its maximum lending limit by a staggering 80%, dropping from 1 billion won (around $718,298) to just 200 million won (approximately $1,436). This significant adjustment underscores a notable reversal for Bithumb’s lending operations, which were only introduced in July.
Temporary Halt and Revised Terms
The exchange had previously halted its crypto lending offerings temporarily on July 29 due to claims of “insufficient lending volume,” only to resume on August 8. A spokesperson for Bithumb stated that the revised terms would target “qualified investors,” defined as those demonstrating a cumulative trading volume exceeding 100 billion won over the past three years. While Bithumb did not directly cite regulatory pressures as a motive for these changes, analysts have noted that the adjustments seem to align with critiques from financial authorities regarding the excessive leverage being offered in a largely unregulated environment.
Regulatory Concerns and Industry Response
The decision from Bithumb comes shortly after a meeting convened by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS), where all five fiat-trading crypto exchanges were present. During this meeting, regulators emphasized their concerns about risks associated with high leverage and highlighted the absence of adequate investor protection measures. They cautioned that certain platforms were providing excessive leverage without sufficient user understanding, suggesting a need for tighter regulations in the crypto lending space.
In light of these developments, Bithumb appears to have revisited its lending policies during the downtime earlier this year. Other exchanges, such as Upbit, are also responding to the evolving regulatory landscape; they have disclosed plans to exclude Tether (USDT) from their upcoming lending offerings.
Future Regulations on Crypto Lending
Industry insiders speculate that the FSC and FSS are poised to unveil comprehensive guidelines governing crypto lending practices, potentially as soon as the end of this month. Such regulations are expected to mirror protocols already established for managing leveraged investments within the South Korean stock market. Initially, Bithumb had proposed lending services across ten crypto assets, including Bitcoin (BTC).
