South Korea’s Jeonbuk Bank Launches Bitcoin-Backed Loans for Businesses

Highlights:

• South Korea’s Jeonbuk Bank has started offering loans to businesses that want to use Bitcoin as collateral.
• Businesses can borrow money without selling their Bitcoin, while approved custodians will hold the pledged assets.
• The bank is also looking to expand its crypto services as South Korea introduces new regulations.

South Korea’s Jeonbuk Bank has introduced Bitcoin-backed loans for corporate customers, making it the country’s first bank to offer loans backed by cryptocurrency collateral. The service allows eligible businesses to borrow South Korean won using Bitcoin as security without selling their holdings.

According to an exclusive report published by Edaily on October 12, the bank has initially limited the service to Bitcoin and business operating expenses. Jeonbuk Bank, a subsidiary of JB Financial Group, plans to consider further expansion based on regulatory changes and market demand.

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Jeonbuk Bank Introduces Bitcoin-Backed Corporate Loans

Under the new lending model, businesses can use Bitcoin as collateral to fund operations. However, Jeonbuk Bank will not directly own, hold, or manage the cryptocurrency pledged against the loans. Instead, an approved digital asset custodian will safeguard the Bitcoin. The bank will manage the lending process through its existing credit and collateral systems.

Jeonbuk Bank selected Bitcoin because of its large market capitalization, high trading volume, and relatively strong liquidity compared with other cryptocurrencies. The bank also conducted internal stress tests to assess whether Bitcoin could serve as reliable collateral during sharp market declines. According to the report, those tests supported its decision to proceed with the service.

Meanwhile, the bank has developed its own digital asset valuation framework. The system uses weighted prices from several global cryptocurrency exchanges and market volatility indicators to calculate collateral values. This approach reduces dependence on a single exchange’s prices when assessing Bitcoin-backed loans.

New South Korean Rules Support Bitcoin Collateral Recovery

The lending service follows changes to South Korea’s civil enforcement rules that took effect on October 1. The revised framework provides procedures for seizing and converting certain cryptocurrency-related rights into cash. It also establishes a process for enforcing collateral claims.

If a borrower fails to repay the loan, Jeonbuk Bank can recover the money by selling the Bitcoin through a court-approved process. The bank will not hold the cryptocurrency itself. Instead, registered crypto service providers will keep the Bitcoin secure.

These providers must follow South Korea’s security rules, including keeping customer assets separate, using offline wallets, and maintaining insurance or reserves. Meanwhile, changes in Bitcoin’s price could affect the value of the collateral and how much the bank can recover if a borrower defaults.

Jeonbuk Bank Plans Further Expansion Into Digital Assets

Jeonbuk Bank is also working to expand its digital asset services. Bank President Park Chun-won wants to focus more on cryptocurrency, with Bitcoin-backed lending as one of its first steps.

The bank is also exploring blockchain payments, money transfers, stablecoins, and digital wallets. It plans to develop a wallet where customers can manage both bank accounts and cryptocurrencies in one place. Meanwhile, Jeonbuk Bank is working on better ways to monitor Bitcoin collateral and manage lending risks as South Korea updates its crypto rules.

As Jeonbuk Bank’s vice president, Mr Jung Sang-Hoon has described the lending system as an indication that banks do not need to hold cryptocurrencies in order to leverage their current credit and collateral management systems. However, the bank has not announced a timetable for expanding the service beyond Bitcoin or corporate operating loans.