Financial Authorities Suspend New Operations of Virtual Asset Lending Services

The financial authorities have decided to suspend new operations of virtual asset lending services until guidelines are established. This measure comes amid the rapid spread of lending services through virtual asset exchanges and concerns over insufficient investor protection mechanisms.

Yonhap News Agency

On August 19, the Financial Services Commission and the Financial Supervisory Service announced, "We will implement administrative guidance to strengthen user protection, taking into account the characteristics and potential risks of virtual asset lending services."

Virtual asset lending services refer to a model in which an exchange lends virtual assets to other users, using the assets or deposits of existing users as collateral. Some exchanges have operated such services. However, issues have arisen, including user losses from forced liquidation and disruptions to market order due to price volatility.

The financial authorities stated, "A considerable number of users are utilizing these services, and if operations continue without protection mechanisms, damages could accumulate before guidelines are established. In addition, businesses seeking to enter the market are also requesting clearer guidance for the sake of predictability."

The authorities have sent administrative guidance to exchanges, requesting a halt to new operations. However, repayment at maturity or extensions under existing contracts will be permitted. Once guidelines are established, the authorities plan to allow the resumption of new operations within the defined scope.

The financial authorities added, "If new operations continue despite the administrative guidance and concerns about potential damages persist, we will implement supervisory measures such as on-site inspections. We will also swiftly establish guidelines related to virtual asset lending to resolve business uncertainty and strengthen investor protection."

The authorities also plan to consider including regulations on lending services in the process of drafting the enforcement decree for the upcoming Virtual Asset User Protection Act.

This content was produced with the assistance of AI translation services.