Financial Authorities Advise Suspension of New Short Selling Operations for 'Leverage' Coins

The launch of new business for lending services on domestic virtual asset (cryptocurrency) exchanges is expected to be temporarily suspended.

According to industry sources on the 19th, financial authorities have announced that they have issued administrative guidance instructing exchanges to suspend the opening of new lending services to protect virtual asset users. This measure is intended to prevent an increase in user damages or market disruption caused by leverage products.

A virtual asset lending service allows users to borrow additional assets from an exchange by providing virtual assets, deposits, etc., as collateral for making investments.

According to the financial authorities, at one exchange’s lending service, from mid-June for about a month, over 27,600 users transacted a total of approximately ₩1.5 trillion, and 13% (3,635 users) among them experienced forced liquidation.

In addition, the financial authorities judged that an abnormal drop in domestic prices and market disruption occurred due to a surge in sales volume following the implementation of the Tether (USDT) lending service.

Accordingly, starting today, the financial authorities have sent administrative guidance documents to exchanges requesting the suspension of new lending service operations. However, repayment or maturity extensions under existing contracts are permitted. The resumption of new operations is expected to be possible only after relevant guidelines are established.