Korbit Enters the Crypto Lending Market, Raising Competition Among South Korea’s Exchanges

Korbit, a prominent digital asset exchange in South Korea, has launched its highly anticipated “coin lending service,” signaling a significant expansion into the competitive crypto lending market. This entry comes four months after rival exchanges Upbit and Bithumb rolled out their lending services in July, while Coinone continues to operate its own “coin borrowing” platform. The landscape for digital asset lending in South Korea is now characterized by intensified rivalry among major won-based exchanges vying for dominance.

Strict Regulatory Framework Shapes Operations

In accordance with guidelines set forth by the Financial Services Commission (FSC), South Korean exchanges are restricted to funding lending services exclusively through proprietary assets rather than customer funds. This regulation places a premium on the scale and composition of each exchange’s proprietary holdings as a key factor determining competitiveness in the crypto lending sector. Exchanges must strategically gather sufficient liquidity to meet potential surges in lending demand and future service expansions.

Korbit Introduces Risk-Reducing Composite Collateral System

On November 18, industry sources reported details of Korbit’s newly launched lending service, which features a sophisticated “composite collateral” mechanism. This system allows borrowers to use up to 24 different digital assets as collateral, enabling them to bundle multiple cryptocurrencies to mitigate risks associated with price fluctuations. This diversification strategy safeguards users against forced liquidations, addressing vulnerabilities exposed by recent incidents.

One high-profile case highlighting the risks of single-asset collateral occurred in October, when USDT (Tether) prices on Bithumb spiked by 338%, triggering widespread forced liquidations among users relying on individual collateralized assets. Korbit’s composite collateral pool aims to avoid similar scenarios by stabilizing the overall collateral value, cushioning borrowers against sharp price movements in any single cryptocurrency.

Additionally, Korbit employs a risk-mitigation approach by offsetting collateral or loan value against their Korean won equivalent in cases of forced liquidation, as opposed to selling assets into the market. This strategy is designed to preserve financial stability and prevent disruptive asset sell-offs.

A local digital asset exchange official remarked, “Single-asset collateral structures are highly susceptible to abnormal price swings, leading to mass liquidations. Composite collateral serves to absorb volatility shocks and reduce simultaneous liquidation risks, providing a more secure lending environment.”

Market Dynamics: Proprietary Asset Reserves Define Strategic Advantage

The FSC mandates that exchanges operate their crypto lending programs solely through proprietary assets, prohibiting the use of customer deposits as loan backing. This restriction underscores the importance of liquidity reserves in determining service scalability.

Among South Korea’s domestic exchanges, Upbit boasts the most substantial liquidity, with proprietary assets totaling approximately 2.92 trillion won as of Q3 2023. These holdings include 16,878 Bitcoin (valued at 2.74 trillion won), 11,033 Ether (worth 65.5 billion won), and 10.62 million Tether (valued at 15.2 billion won). Upbit also retains over 101.6 billion won in additional digital assets across major cryptocurrencies, providing it with unmatched lending capacity.

Comparatively, Bithumb's proprietary assets at the end of Q3 stood at 189.5 billion won. The exchange holds 58.83 million Tether (approximately 84.2 billion won), 175 Bitcoin (17.3 billion won), 1,950 Ethereum (11.5 billion won), and 1.87 million XRP (7.6 billion won). Interestingly, Bithumb’s reserves have grown significantly. Its Tether reserves surged 975% year-over-year, reflecting both an increase in asset quantity and the rising won-to-USDT valuation aimed at augmenting its stablecoin liquidity.

Korbit’s proprietary holdings as of December last year totaled 78.4 billion won, with 71 billion won allocated to “investment virtual assets” used for lending profitability. This includes significant reserves of 487 Bitcoin and 72 Ether, among other prominent coins. The remaining 7.3 billion won is categorized as operational virtual assets. Recent activity has positioned Korbit to responsibly scale its lending platform, albeit behind its larger competitors.

Coinone, in contrast, maintains modest reserves. As of last year, it held 211 Bitcoin, 749 Ethereum, and approximately 4.95 million Tether. Subsequent liquidation of some assets, including 10 Bitcoin, 300 Ethereum, 200,000 XRP, and 40,000 Cardano (ADA), has confined Coinone to offering Bitcoin-backed lending only.

Competitive Divergence Expected to Expand

The exclusive use of proprietary assets has created a natural threshold for lending operations, with exchanges possessing robust reserves enjoying greater latitude to expand offerings. Conversely, exchanges with limited liquidity are forced to adopt conservative lending strategies, potentially limiting profitability and growth.

Exchanges that directly operate lending services benefit from capturing the full revenue stream, including interest income, while simultaneously bearing comprehensive risk management responsibilities. Bithumb exemplifies this shift, having transitioned from outsourcing its lending services to now directly managing them. Despite significant transaction volumes—with 474,821 cumulative loans and a monthly lending volume exceeding 1.13 trillion won by the end of September—direct profitability remains constrained relative to the rising demand for lending services.

An industry insider explained, “The FSC’s regulations requiring proprietary asset use inherently tie lending capacity to liquidity scale. Larger reserves empower exchanges to broaden their lending portfolios and deepen market presence, while smaller players must prioritize risk management over expansion. Over time, these differences will increasingly define the competitive landscape in South Korea’s crypto lending market.”

Conclusion: The Evolving Face of Crypto Lending in Korea

Korbit’s entry into crypto lending underscores both the growing demand for such services and the widening divergence in operational strategies among South Korea's major exchanges. With composite collateral innovation and FSC-imposed reliance on proprietary assets, the market is evolving toward heightened risk management and liquidity-dependent scalability. As exchanges compete for leadership, asset reserves and diversification will remain critical in shaping the future of crypto lending in South Korea's dynamic digital asset sector.