South Korean Exchanges Forced to Pause Crypto Lending Amid Regulatory Scrutiny

South Korea’s financial watchdog has temporarily barred cryptocurrency exchanges from offering lending services, disrupting a fast-growing sector of the digital asset market.

The Financial Services Commission (FSC) issued the directive today, instructing platforms to halt lending operations until official rules are established. The decision affects major exchanges like Upbit and Bithumb, which recently introduced services allowing users to borrow against their holdings.

The FSC had previously warned exchanges about the legal uncertainties surrounding crypto lending, prompting Upbit and Bithumb to briefly suspend their offerings last month. Bithumb later relaunched with revised terms.

The regulatory freeze comes as South Korea prepares for the Digital Asset Basic Act, which could provide a legal foundation for crypto lending services in the future.