South Korea caps crypto lending rates at 20% as regulators target risky practices in the crypto lending sector. The move, according to the country’s Financial Services Commission (FSC), aims to reduce investor harm while markets evolve.
Key limits on crypto lending
The FSC has capped interest rates on crypto lending at 20% per annum. It also explicitly banned leveraged lending that exceeds the value of the collateral. Therefore, platforms must align loan sizes strictly with posted assets.
In addition, lending services are now restricted to only the top 20 cryptocurrencies by market capitalization or those traded on at least three local exchanges. As a result, smaller tokens face tighter access to credit products.
Why the clampdown now?
An FSC official warned, “If high-risk lending services proliferate indiscriminately amid the regulatory vacuum under the current law, investor damage is inevitable.” The statement underscores growing caution after past market turmoil.
Because the new guidelines narrow eligible assets and cap rates, operators will likely adjust risk models and yields. Meanwhile, users should expect fewer high-yield offerings and clearer collateral rules.
What platforms must consider
To comply, providers should do the following:
• Observe the 20% annual interest cap.
• Avoid any leveraged lending above collateral value.
• Limit supported assets to the top 20 by market cap or those on three local exchanges.
For background on crypto lending dynamics, see this overview from Binance Academy. Additionally, stablecoin mechanics often shape lending risk; learn more in our guide on how stablecoins work.
