Bithumb, one of South Korea’s most prominent cryptocurrency exchanges, has announced a significant downsizing of its crypto lending operations in response to mounting regulatory oversight. This move marks a pivotal shift in the nation’s crypto landscape, highlighting the growing role of financial authorities in shaping exchange policies. It also signals a broader regulatory push toward a safer, more transparent digital asset environment that places investor protection above aggressive market expansion.
Major Cuts to Lending Limits
The revised lending policy introduces two major changes. First, the maximum leverage offered to traders has been halved, dropping from 4× to just 2×. Second, the overall lending cap has been reduced by 80%—from 1 billion KRW (approximately $718,000) to 200 million KRW (around $143,600).
These measures are aimed at reducing the inherent risks of high leverage in volatile crypto markets. Excessive borrowing can quickly lead to margin calls, forced liquidations, and steep losses for traders. By lowering borrowing limits and capping loan amounts, Bithumb seeks to protect its users while promoting a more stable and controlled trading environment.
Suspension and Careful Relaunch
Bithumb temporarily halted its lending services on July 29, initially citing low trading volumes as the cause. However, the pause also served as an opportunity to reassess the lending structure under tightening regulatory expectations.
The platform reinstated lending on August 8, only after what it described as a “comprehensive review” of its services. The updated rules aim to bolster investor safety and improve service quality. Significantly, the stricter limits now apply to all customers—including “qualified investors” with lifetime trading volumes exceeding 100 billion KRW—showing that the changes are universal and not limited to retail traders.
Intensifying Regulatory Scrutiny
While Bithumb has not named the specific authorities prompting the changes, industry insiders point to the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). Both agencies have raised concerns over the risks of high-leverage lending, market instability, and the lack of clear legal structures governing crypto loan products.
The policy shift follows a high-level meeting between regulators and South Korea’s five largest fiat-to-crypto exchanges, where discussions centered on minimizing lending-related risks and enhancing investor safeguards. In a parallel move, rival exchange Upbit also scaled back its lending services, removing USDT from its offerings.
Market analysts expect the FSC and FSS to unveil comprehensive crypto lending regulations by the end of the month, potentially modeled after existing rules in South Korea’s equity markets.
Broader Market Impact
Bithumb’s rapid adjustments reflect a larger industry transition toward compliance-driven practices. The simultaneous policy changes at Bithumb and Upbit show how quickly major exchanges are responding to regulatory demands, even before formal rules take effect.
While the tightened rules may limit some high-risk trading strategies, they enhance market safety and could ultimately attract more institutional investors. Over time, these changes may strengthen South Korea’s reputation as a stable and well-regulated crypto market.
Conclusion
By cutting leverage and reducing lending caps, Bithumb has taken a decisive step toward aligning with regulatory priorities. This transformation marks a shift from aggressive lending policies to a measured, compliance-focused approach. As the Korean crypto industry continues to mature, the emphasis on investor protection and regulatory alignment is likely to become a defining feature of its long-term growth.
