Jeonbuk Bank has become the first bank in South Korea to offer loans denominated in won and backed by bitcoin, according to exclusive Monday reporting by the Korean financial outlet Edaily.

The lender, a subsidiary of JB Financial Group, has already begun extending the credit. The product is initially limited to corporate customers raising working capital, and bitcoin is the only eligible form of collateral. The bank said it may expand the service depending on regulatory changes and market demand, according to the report.

JUST IN: South Korea's Jeonbuk Bank will offer the first ever bitcoin-backed won loans for clients pic.twitter.com/jXbIPsejWU

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Under the arrangement, Jeonbuk Bank will not own or control the pledged bitcoin itself. Instead, the collateral is held by a specialized custodian, limited to virtual asset service providers registered under Korea's Act on the Reporting of Specific Financial Information, the report noted.

If a borrower defaults, the bank will not take possession of the coins. It will instead liquidate them through enforcement procedures such as a court-ordered sale and recover the loan from the proceeds.

The bank said it selected bitcoin because its market capitalization and trading volume are the largest of any digital asset. Its own stress tests, it added, showed bitcoin held up as collateral even during sharp price declines. To value pledged coins, the lender uses an index based on a weighted average of prices across multiple global exchanges.

Comparable products already exist overseas. JPMorgan Chase debuted bitcoin-backed loans for institutional clients in March, while Switzerland's Sygnum Bank offers similar credit. In South Korea, banks' direct engagement with digital assets has been far narrower — largely confined to providing real-name verified accounts for crypto exchanges under a system introduced in 2018, a framework Jeonbuk's new product now extends into lending for the first time.

The launch marks the first concrete result of the "Crypto Bank" vision put forward by Jeonbuk Bank President Park Chun-won. The lender is the only regional bank in South Korea to provide real-name verified accounts to crypto exchanges, and is preparing an "all-in-one wallet" that combines fiat accounts and digital asset wallets.

"This loan is an example of designing a risk management and recovery structure that allows us to utilize existing bank lending and collateral management systems without directly holding virtual assets," said Jeong Sang-hoon, executive vice president of the bank's digital division.

For Korea's banking sector, the open questions are whether the service broadens beyond corporate borrowers and whether other institutions attempt similar structures — outcomes the bank itself has tied to regulatory changes and market demand.

This article is based on reporting by Mathew Di Salvo, first published on Bitcoin Magazine.