Jeonbuk Bank starts South Korea’s first bitcoin-backed loans

Jeonbuk Bank began offering won-denominated loans backed by bitcoin to corporate customers on Oct. 12, becoming South Korea’s first bank to accept the cryptocurrency as collateral, Edaily reported. The bank is limiting the loans to companies seeking working capital, and bitcoin is the only eligible collateral.

How will the bank hold the bitcoin?

A specialized custodian and asset manager will hold the bitcoin; Jeonbuk Bank will neither own nor directly control it, according to Edaily. The bank limits custody to registered virtual asset service providers.

Jeonbuk Bank also set its own valuation criteria, Edaily reported. Its benchmark uses a weighted average of prices from multiple global exchanges and the median of market volatility indicators, rather than relying on one exchange’s price.

What happens if a borrower defaults?

The bank’s structure allows it to pursue recovery without taking possession of the bitcoin, Edaily reported. Under the process it described, collateral can be liquidated through enforcement procedures such as a court-ordered sale, with the proceeds used to repay the loan.

The framework follows amendments to South Korea’s Civil Enforcement Rules that took effect Oct. 1, according to Cointelegraph’s report. The rules set out procedures for seizing and liquidating claims to virtual assets.

What are the loan terms?

Jeonbuk Bank has not publicly disclosed loan amounts, interest rates or loan-to-value requirements, Cointelegraph reported. The bank said it may review expanding the service based on regulatory changes and market demand, Edaily reported.

Sources

• Edaily reported — en.edaily.co.kr
• Cointelegraph’s report — cointelegraph.com