Zuid -Korea stops crypto -loans as market levers profit for legal concerns

South Korean financial authorities have temporarily suspended new crypto -credit services in a direct answer to an important liquidation event at a local stock market.

This step emphasizes the growing global concerns about excessive leverage in the market for digital assets.

The decision of the Financial Services Commission (FSC) of the country follows a recent incident at Bithumb, where regulators noted that more than 27,000 customers were using credit services in June.

While market prices were waving against them, a full 13% of these users was forced to liquidate.

The authorities stated that this break will take until formal “virtual guidelines for rental service services” can be drawn up. They justified the action by noting that “user protection devices … are insufficient” and that there were “worries about damage to a healthy trade order”.

“Directional refers to stricter supervision of leverage and retail risk instead of a permanent prohibition,” said Luke, co-founder of Layer-1 Network Mitosis, said Decrypt About the suspension.

This break is “a signal that the government has established that they should provide further regulatory clarity to best protect investors,” said Austin King, co-founder of the Ethereum-based Layer-1 Network Omni Network, told Decrypt.

King believes that it is ‘no control at all’, but rather a government that recognizes its own ‘insufficient regulatory clarity’ and creates ‘clear rules of the road’.

This incident is an example at the micro level of a trend at the macro level.

According to a recent report from Galaxy Digital, Leverage is building in the crypto ecosystem, especially since Bitcoin’s of all time in August.

The report showed that the combined value of outstanding crypto-collateral loans in both centralized and decentralized projects achieved a record high of $ 44.25 billion, an increase of almost 30% compared to the previous quarter.

Lending on the chain grew by 42% to $ 26.5 billion, while open loans on centralized platforms expanded by 14.66% to $ 17.78 billion.

The Bitfinex analysts also emphasize this growing vulnerability and notice that the total liquidations have been increased, with average daily liquidations of more than $ 350 million in the last 30 days.

Coinalyze data shows that more than $ 3 billion in positions has been liquidated in August, with an overwhelming contribution from Short sellers.

“This follows a broader pattern,” Luke added, placing the switch of South Korea in the global context by mentioning Mica in Europe and recent regulatory developments in the US

“The ratio of Altcoin readings to BTC readings has risen to historically increased levels,” said Bitfinex’s report in July.

The build-up in leverage in the past month, especially in the Altcoin segment, suggests a return of speculative enthusiasm. It indicates that the cryptomarkt is taking a more fragile phase with an increased risk of liquidations.

According to Austin King, this is precisely the reason why the rapid action of Zuid -Korea serves as a clear regulatory warning, which results in a necessary “limitation for the maximum amount of leverage offered on derived products” and creating a blueprint for other nations to follow.