Jeonbuk Bank rolls out South Korea's first bitcoin-backed loans

Reports indicate Jeonbuk Bank is the first South Korean financial institution to provide loans denominated in won that are secured by bitcoin.

The JB Financial Group subsidiary began making these loans available, as exclusively reported by South Korea's Edaily on Monday.

Currently, only corporate clients seeking working capital can access the product, with bitcoin as the sole acceptable collateral. Edaily noted that the bank stated potential expansion based on regulatory shifts and market interest.

Jeonbuk Bank does not take ownership or control of the bitcoin. A specialized custodian, restricted to virtual asset service providers registered under Korea's Act on the Reporting of Specific Financial Information, holds the collateral, the bank added.

In the event of a default, the bank will not seize the coins; instead, it will liquidate them via enforcement steps like a court-ordered sale and recover the loan from the resulting funds.

Jeonbuk Bank selected bitcoin due to its market capitalization and trading volume, the highest among digital assets, and reported that internal stress tests demonstrated bitcoin's resilience as collateral even during significant price drops. A weighted average index from multiple global exchanges is used to value the collateral.

Comparable products are already available overseas. JPMorgan Chase launched bitcoin-backed loans for institutional clients in March, and Switzerland's Sygnum Bank provides similar credit services.

This loan marks the initial tangible outcome of the "Crypto Bank" initiative by Jeonbuk Bank President Park Chun-won. The institution is the sole regional bank offering real-name verified accounts to crypto exchanges and is developing an "all-in-one wallet" that integrates fiat accounts with digital asset wallets.

“This loan is an example of designing a risk management and recovery structure that allows us to utilize existing bank lending and collateral management systems without directly holding virtual assets,” said Jeong Sang-hoon, executive vice president of the bank’s digital division.