Korea's P2P lending law: the Online Investment-Linked Finance Act, explained

What is Korea’s P2P lending law?

Korea regulates peer-to-peer (P2P) lending under a dedicated statute: the Act on Online Investment-Linked Financial Business and Protection of Users, which the financial regulator refers to in short form as the Online Investment-linked Finance Act (in Korean, 온라인투자연계금융업 및 이용자 보호에 관한 법률, where the regulated business is called 온투업). It has been in force since August 27, 2020, and it is supervised by the Financial Services Commission (FSC) through a registration regime.

This makes Korea unusual. Many countries fit P2P lending awkwardly into older lending or securities rules. Korea instead passed what legal commentators have described as the world’s first dedicated P2P-financing statute — a purpose-built law that names the activity, defines who may run a platform, and sets out how investors must be treated (Lee&Ko newsletter, published December 2019; Shin&Kim newsletter, published November 7, 2019). The UK, by contrast, has regulated P2P lending as “loan-based crowdfunding” inside the existing FCA framework since April 1, 2014 rather than under a standalone law (RPC) — a useful contrast between fitting P2P into older rules and writing a new one for it. For anyone trying to understand Korean private credit from the outside, this Act is the right starting point.

When did the law take effect, and who enforces it?

The Act was enacted in 2019 — it cleared the National Assembly in late October 2019 and was promulgated on November 26, 2019 — and took effect on August 27, 2020. Existing operators were given a transition window to register, which closed on August 26, 2021 — after which only FSC-registered firms could lawfully run an online investment-linked lending business, and unregistered operation became a criminal offence.

The supervisor is the FSC. Its role is structured as registration rather than case-by-case product approval: a platform registers as an online investment-linked finance business, and registration brings it under ongoing supervision.

Milestone	Date
Act promulgated	November 26, 2019
Act in force	August 27, 2020
Transition period for existing operators ends	August 26, 2021
Supervisor	Financial Services Commission (FSC)

Source: FSC press release, “Legislation on P2P Lending Takes Effect” (published August 26, 2020); Korea Law Translation Institute, English text of the Act.

A practical effect of the registration regime is consolidation. Before the Act, a large number of platforms operated in a lightly defined space; afterward, only a much smaller set of registered operators remained. With the transition window closing on August 26, 2021 and unregistered operation carrying criminal liability, the law raised the bar for who could be in the market at all.

What does the Act require of a platform?

A registered platform must meet a set of standing obligations under the Act covering capital, disclosure, lending limits, and investor protection (KLRI English text). These are entry conditions and ongoing duties, not one-time filings.

• Registration with the FSC, before a platform may operate, with a minimum equity capital of KRW 500 million that scales upward with the size of the platform’s loan book — the threshold rises (to KRW 1 billion and KRW 3 billion) for larger prior-year linked-loan balances. A registrant must also keep at least 70% of its applicable minimum capital after registration, and amend its registration if its loan book grows into a higher capital band (FSC press release, published August 26, 2020; KLRI English text).
• Disclosure to investors about loans, borrowers, and the platform itself, so that investment decisions rest on published information rather than on the operator’s discretion.
• Lending and investment limits, which cap exposures. Lending to a single borrower may not exceed 7% of the platform’s total P2P loan balance or KRW 7 billion, whichever is smaller (FSC press release, published August 26, 2020).
• Investor-protection rules, including separation of investor funds from the platform’s own assets. Investor money must be held with an external depository — a bank, securities finance company, or savings bank with equity capital of KRW 1 trillion or more — rather than simply ring-fenced on the platform’s own books (FSC press release, published August 26, 2020).

The common thread is that the platform is a regulated intermediary, not a free-form marketplace. Each requirement narrows what an operator can do, in exchange for being allowed to connect investors and borrowers at scale.

What is the right to receive principal and interest, and why does it matter?

Under the Act, an investor who funds a loan does not own the loan contract directly. Instead, the investor holds a defined legal right — the right to receive principal and interest (in Korean, 원리금수취권) — which is the entitlement to the principal and interest repayments that the underlying loan produces.

This distinction matters for two reasons. First, it separates two ideas that are easy to conflate: the loan receivables (the economic right to a loan’s repayments, held within the lending structure) versus the right to receive principal and interest that an investor holds under the Act. Second, that right is not freely transferable to anyone. It can be assigned only to eligible transferees — qualified holders such as institutions, rather than the general public. That eligibility constraint is one of the reasons cross-border access to Korean P2P assets has to be structured carefully rather than offered to anyone who wants in. (We cover the right to receive principal and interest in more depth in a separate post.)

How does the Act protect investors?

The Act’s most important ongoing rule, for cross-border purposes, is that investors in the same loan pool must be treated equally. If domestic and overseas participants are funding the same pool of loans, the Act does not permit differences between them in return, repayment priority, or access to information.

In concrete terms, that means three things cannot diverge between investors in the same pool:

• Return — no investor group may receive better economics on the same loans than another.
• Repayment priority — in the event of delinquency or default, no route can be placed ahead of another in the order of repayment.
• Information access — giving one group of investors better dashboards, reports, or data than another can itself be a form of prohibited discrimination, because information asymmetry distorts who can act and when.

This non-discrimination principle, combined with the registration and disclosure requirements above, is what gives the Korean P2P market its supervised character: a regulated operator, published information, separated funds, and equal treatment within a pool.

Why does this matter for global investors?

For a global investor, the headline is reassurance: Korean P2P lending is not an unregulated frontier. It sits inside a named statute, under a single supervisor (the FSC), with a registration regime, disclosure duties, and investor-protection rules. That is a meaningfully different starting point from markets where online lending has no dedicated legal home.

It also explains why direct access is limited. The right to receive principal and interest can be assigned only to eligible transferees, and the non-discrimination rule means any structure serving overseas capital must keep that capital on equal footing with domestic investors in the same pool. These are not obstacles to be routed around — they are the rules a compliant structure has to satisfy. This is the regulatory backdrop against which root64 is built: a transparency-first platform for Korean loan assets, designed for professional investors and intended to operate within these rules rather than outside them.