The cryptocurrency exchange Bithumb has recently made significant adjustments to its crypto lending services in response to concerns from financial regulators. According to a report by the South Korean newspaper Kookmin Ilbo, Bithumb has reduced its leverage ratio from x4 to x2 and slashed its maximum lending cap by 80% from 1 billion won to 200 million won.
This move marks a major change for Bithumb, as the platform only launched its lending services in July. The exchange was forced to temporarily suspend its lending services on July 29 due to insufficient lending volume but resumed the service on August 8. A Bithumb spokesperson stated that the adjustments were made to protect investors and improve the quality of services.
The new terms will also apply to qualified investors with a cumulative trading volume of over 100 billion won in the past three years. While Bithumb did not explicitly mention regulatory pressure, Kookmin Ilbo reported that the move reflects criticism from financial authorities regarding excessive leverage without a clear legal framework.
The decision to scale back crypto lending services comes after a meeting of all five fiat-trading crypto exchanges at the request of the Financial Services Commission (FSC) and Financial Supervisory Service (FSS). Regulators expressed concerns about leverage-related risks and inadequate investor protection protocols. They highlighted the offering of excessive leverage to users and a lack of understanding about crypto lending among platform users.
In response to regulatory concerns, Bithumb and other platforms are reevaluating their lending services. Upbit, for example, announced that it will exclude Tether (USDT) from its new crypto lending services. Industry sources anticipate that the FSC and FSS will release comprehensive guidelines for crypto lending by the end of the month, likely similar to protocols governing leveraged investments in the South Korean stock market.
Initially, Bithumb planned to offer lending services on 10 crypto assets, including Bitcoin (BTC). The exchange’s decision to adjust its lending terms underscores the evolving regulatory landscape for cryptocurrency platforms. By prioritizing investor protection and compliance with regulatory guidelines, Bithumb aims to ensure the sustainability and legitimacy of its crypto lending services.