Jeonbuk Bank has executed a corporate loan denominated in Korean won and secured by Bitcoin held by a corporate customer. Edaily reported on October 12 that it was the first such case in South Korea's banking sector. Maeil Business Newspaper said it was not the launch of a formal product, but a pilot case in which Bitcoin was used as collateral for a single existing corporate loan. Use of the proceeds was limited to the company's operating funds.
According to Edaily, the pledged Bitcoin is managed by a specialized custody and management provider, and Jeonbuk Bank does not take ownership or direct control of the asset itself. If the borrower fails to repay, the structure calls for the Bitcoin to be converted into cash through enforcement procedures such as a court-ordered sale, rather than transferred directly to the bank, allowing the bank to recover the loan. Jeonbuk Bank described the transaction as a case that uses existing lending and collateral-management frameworks within the current legal and regulatory system.
Custody was assigned to a virtual asset service provider whose registration has been accepted under South Korea's Act on Reporting and Using Specified Financial Transaction Information. Edaily reported that the bank established a collateral valuation framework incorporating prices from several overseas exchanges and measures of market volatility, and conducted its own stress tests for a sharp decline in Bitcoin's price. The report did not provide the specific testing conditions or results.
The amendment to the Civil Execution Rules concerning collateral recovery was promulgated on October 12 and will take effect on November 1. The amended rules specify procedures for the attachment and liquidation of claims for the transfer of virtual assets, meaning the right to demand the return of assets from a custodian or similar entity, as well as for the enforcement of security interests. The change refines enforcement procedures and is distinct from a rule newly authorizing banks to make crypto-backed loans.
The reports reviewed did not disclose specific contractual terms such as the loan amount, interest rate, loan-to-value ratio (LTV), additional-collateral requirements or the name of the custodian.