Bitcoin Magazine South Korean Lender Jeonbuk Bank to Offer Bitcoin-Backed Loans

Jeonbuk Bank has become the first bank in South Korea to offer won-denominated loans backed by bitcoin, according to reports. 

The subsidiary of JB Financial Group has started offering the loans, according to exclusive Monday reporting by the country’s Edaily paper. 

For now, the product is limited to corporate customers raising working capital, and bitcoin is the only eligible collateral. The bank said it may expand the service depending on regulatory changes and market demand, the report added. 

Jeonbuk Bank won’t own or control the bitcoin itself. 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, it further noted. 

If a borrower defaults, the bank won’t take the coins but will rather liquidate them through enforcement procedures such as a court-ordered sale and recover the loan from the proceeds.

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

Similar products already exist abroad. JPMorgan Chase debuted bitcoin-backed loans for institutional clients in March, and Switzerland’s Sygnum Bank offers comparable credit.

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