Jeonbuk Bank starts bitcoin-backed corporate loans in South Korea

Jeonbuk Bank has started issuing won-denominated loans to corporate clients against bitcoin collateral, the first bank in South Korea to let companies borrow cash against crypto holdings, CoinDesk reported.

The bank will not hold the coin itself; a registered crypto service provider keeps the assets in custody while the bank issues the loan. The bank, a unit of JB Financial Group, restricts loan proceeds to business operating costs, according to local outlet Edaily. The token was quoted at $84,155.39 in the CoinDesk report.

An official at the bank confirmed to local outlet Jaekyung Ilbo that a loan has already been executed, and declined to name the borrower.

If a borrower defaults, the bank would recover through a court-ordered sale of the bitcoin. That route draws on revised Civil Enforcement Rules that took effect Oct. 1 and set out legal steps for seizing and selling rights tied to digital assets, according to the local reporting. The bank ran stress tests on how bitcoin would hold up during sharp price declines and chose it for its deep liquidity, which allows the collateral to be liquidated when needed.

Loan rates, borrowing limits and collateral requirements were not disclosed. Jaekyung Ilbo reported that the bank reviewed loan-to-value ratios and margin-call thresholds for major tokens, including bitcoin and ether, while designing the service. Only bitcoin is eligible at present.

In August Jeonbuk Bank became the first regional Korean bank to run Ripple Payments, extending that company's institutional push beyond the country's largest financial firms, as this publication reported.