Only bitcoin held by corporate clients accepted as collateral
Jeonbuk Bank, an affiliate of JB Financial Group, has become the first bank in South Korea to offer won-denominated loans backed by bitcoin as collateral.
According to financial industry sources Monday, Jeonbuk Bank has begun extending won-denominated loans to corporate clients for business operating expenses, using bitcoin as collateral. Earlier this year, Jeonbuk Bank President Park Chun-won signaled the move, saying the bank would "preempt new financial demand through innovative products such as the country's first virtual asset-backed loan."
The loan is structured similarly to stock-backed lending, where customers pledge assets they hold in exchange for won-denominated funds. The bitcoin used as collateral is held within the custody and management framework of a professional custodian, and Jeonbuk Bank does not hold ownership or direct control over the bitcoin itself.
In designing the product, the bank reviewed loan-to-value ratios and margin call thresholds for major virtual assets including bitcoin and ether. It established loan limits and collateral management standards to guard against a drop in collateral value caused by price fluctuations.
For now, only bitcoin held by corporate clients is accepted as collateral, and the use of loan proceeds is restricted to business operating expenses. The bank plans to review whether to expand eligibility based on regulatory developments and market demand.
The launch is drawing attention as a potential catalyst for opening a broader virtual asset-backed lending market, given that banks have long stayed away from such products. No provision in current law explicitly prohibits the use of virtual assets as loan collateral.
The de facto ban took hold after a pan-government response to the virtual asset frenzy of late 2017 and early 2018 included a measure barring financial institutions from accepting virtual assets as collateral — a restriction that hardened into industry practice even without a formal legal basis. Industry observers now expect Jeonbuk Bank to apply for designation as an innovative financial service provider.
forest@heraldcorp.com
