The Financial Services Commission (FSC) announced that, starting September 5, the Digital Asset Exchange Alliance (DAXA) will enforce self-regulatory guidelines for virtual asset lending services. The move comes amid growing concerns over potential investor harm driven by intensified competition among exchanges.
The core of the guidelines lies in clarifying the scope of permissible lending services. In particular, leveraged lending that exceeds collateral value and cash lending services with KRW-based repayment methods that could violate the Money Lending Business Act are strictly prohibited. Exchanges are also banned from outsourcing or indirectly offering lending services through third parties. All lending must be conducted directly using the exchange’s own assets.
Investor protection mechanisms have been significantly reinforced. First-time users must complete DAXA-led online education and a suitability test, while individual lending limits will be set based on trading history and experience. Similar to short-selling limits in equity markets, lending caps will range between 30 million KRW and 70 million KRW depending on user profiles.
Exchanges are also required to issue advance notifications of potential forced liquidations. If users provide additional collateral within limits to avoid liquidation, exchanges must accept it. Meanwhile, interest rates are capped at 20% per year, and exchanges must disclose real-time lending availability, forced liquidation statistics, and other key data.
Market stability measures are also included. Eligible virtual assets for lending are limited to those within the top 20 by market capitalization or listed on at least three KRW-based markets. Assets under abnormal trading status or flagged with investor warnings are excluded from lending and collateral use. Exchanges must disclose eligible assets, balances, and collateral status on their websites, and are required to implement internal controls to prevent excessive price volatility.
While the guidelines will first take effect as self-regulation under DAXA, the FSC stated it plans to legislate the rules based on operational outcomes in the future.
