One loan has been made. That is the confirmed count behind South Korea’s first traditional bank lending against bitcoin, offered by Jeonbuk Bank, a unit of JB Financial Group, CoinDesk reported on Monday.
The product is for corporate clients only. Loans are in won and the money is limited to business operating costs, according to Edaily. Bitcoin is the only collateral accepted for now.
The bank does not hold the coins. A registered crypto service provider keeps them in custody. If a borrower defaults, the bank would recover its money through a court-ordered sale of the bitcoin, a route that depends on revised Civil Enforcement Rules that took effect on 1 October.
Jeonbuk says it stress-tested how bitcoin would hold up in sharp price drops and chose it for its liquidity, which allows a quick sale.
Local press reported that the bank reviewed loan-to-value ratios and margin-call thresholds for bitcoin and ether while designing the product.
A bank official told Jaekyung Ilbo that one loan has already been executed, and declined to name the borrower. Chief executive Park Chun-won had said earlier this year that the bank would launch the country’s first crypto-backed loan.
The terms that would show whether this is a product or a gesture are missing. There is no interest rate, no borrowing limit and no collateral ratio, and the single loan has no disclosed size. Jeonbuk says it may expand the service depending on demand and on changes to crypto rules.
