A company in South Korea can now borrow won from a bank and pledge Bitcoin while a custodian keeps the coins. Jeonbuk Bank, part of JB Financial Group, is the first bank in the country to make that loan, Edaily says. It's open to corporate clients only. The money can only go to business operating funds, and Bitcoin is the only collateral the bank will take. Jeonbuk hasn't published an interest rate, a loan size, or a cap.
A virtual asset service provider registered under the Act on the Reporting of Specific Financial Information holds the Bitcoin, and Jeonbuk Bank stays off the wallet. If a borrower defaults, recovery runs through a court sale under civil enforcement rules that took effect on Oct. 1, and the bank is repaid from the cash.
Jeonbuk limited the collateral to Bitcoin because that market is the deepest, and because a sale is easier if the bank has to collect. The bank says its stress tests still left Bitcoin sellable after a sharp drop. It prices the collateral from a weighted average of prices on multiple global exchanges, plus a volatility measure, so one exchange can't set the number. It still hasn't said how far Bitcoin can fall before a sale. It'll review a wider rollout later, against regulation and demand, and it hasn't put a date on that review.
Registered custodians have to meet Korea's security rules, including certified information security, a required share of coins in cold storage, and insurance or reserves. You get won. Someone else holds the Bitcoin. Jeonbuk is lending inside the laws it already has. JPMorgan already lends against Bitcoin for institutional clients, and Switzerland's Sygnum Bank offers a similar facility. What's new is a Korean bank doing it in won.
Ordinary lending, on paper
A Jeonbuk Bank official told Aju Business Daily that the loan sits inside the credit business a bank can already do under the Banking Act, and that the bank didn't receive an innovative financial service designation. The bank is offering this as ordinary lending. If that holds, another Korean bank can copy it without a special permit.
If you hold Bitcoin as an individual in Korea, this offer stays closed to you. If you run a company that already holds Bitcoin, ask Jeonbuk what rate you'd pay and at what price the collateral would be sold. Those answers decide whether the loan is worth taking.
Photo: mauveine.kim / Wikimedia Commons, CC0.
