Jeonbuk Bank Becomes South Korea's First Traditional Bank to Offer Bitcoin-Backed Loans
Key Takeaways
- •Jeonbuk Bank has become South Korea's first traditional bank to offer corporate loans collateralized by bitcoin holdings.
- •The loans are disbursed in Korean won and restricted to business operating expenses, and at least one loan has already been completed, though the borrower was not identified.
- •Pledged bitcoin will be held in custody by a registered crypto service provider rather than the bank, and repayment failures would trigger a court-ordered sale under revised Civil Enforcement Rules that took effect Oct. 1.
- •The bank selected bitcoin as collateral after conducting stress tests on sharp price declines, choosing the asset for its deep liquidity, which supports liquidation when needed.
- •Loan rates, borrowing limits, and collateral requirements were not disclosed, but the bank reviewed loan-to-value ratios and margin-call thresholds for bitcoin and ether during design, leaving room to broaden eligible collateral or expand the service.
Jeonbuk Bank, a unit of South Korea's JB Financial Group, has begun offering bitcoin-backed loans to corporate clients, becoming the country's first traditional bank to allow firms to borrow cash against their cryptocurrency holdings. For companies holding bitcoin, the product offers a way to raise won for operations without selling their coins, extending a collateralized lending model banks have long applied to assets such as real estate to digital collateral in South Korea's traditional banking sector.
The bank will issue the loans in Korean won, the country's fiat currency, with proceeds restricted to business operating costs, according to local news outlet Edaily. A Jeonbuk Bank official confirmed to local outlet Jaekyung Ilbo that a loan has already been executed, though the borrower was not named.
For the time being, only bitcoin (BTC) — trading at $83,498.63 at the time of writing — can be pledged as collateral. Jeonbuk Bank will not hold the bitcoin itself. Instead, a registered crypto service provider will keep the assets in custody while the bank issues the loan.
If a borrower fails to repay, the bank would seek to recover its funds through a court-ordered sale of the bitcoin. The process draws on revised Civil Enforcement Rules that took effect on Oct. 1, which set out legal procedures for seizing and selling rights tied to digital assets, according to the local reports.
Before launching the product, the bank ran its own stress tests to assess how bitcoin would perform during sharp price declines and selected BTC based on its deep liquidity, which allows the collateral to be liquidated when needed.
The launch brings a South Korean bank's offering in line with a wider trend in which bitcoin-backed lending is evolving into a mainstream source of credit.
The reports did not disclose loan rates, borrowing limits or collateral requirements. However, Jaekyung Ilbo reported that the bank reviewed loan-to-value ratios and margin-call thresholds for major tokens, including bitcoin and ether (ETH), while designing the product.
Jeonbuk Bank could expand the service based on market demand and changes to crypto regulations. The new offering follows a pledge by the bank's CEO, Park Chun-won, who said earlier this year that the lender would roll out the country's first crypto-backed loan, as Herald Business reported. What to watch from here includes whether the bank discloses specific loan terms and whether it broadens eligible collateral beyond bitcoin, having reviewed loan-to-value thresholds for ether during the design phase.
Source: CoinDesk
