South Korea's Jeonbuk Bank has launched the country's first bank-issued won loans backed by Bitcoin, marking a significant milestone in the adoption of cryptocurrency-collateralized lending in Asia. According to Edaily, the lender, a subsidiary of JB Financial Group, has started offering the service on a limited basis to corporate customers seeking business operating funds, with Bitcoin currently the only digital asset accepted as collateral. The bank will accept Bitcoin as collateral through registered digital asset custodians without taking direct ownership or control of the pledged cryptocurrency, operating under South Korea's existing banking and digital asset rules. Jeonbuk Bank's digital division vice president, Jung Sang-hoon, described the product as applying existing bank lending and collateral management systems to digital assets without requiring direct ownership of the underlying cryptocurrency.
Under the arrangement, customers pledge Bitcoin held by specialist digital asset custodians, while the bank provides financing in Korean won without taking direct ownership or control of the cryptocurrency. The bank has structured the product to operate under South Korea's existing banking and digital asset rules, including newly introduced procedures for enforcing claims against cryptocurrency collateral. Custody arrangements are handled separately from the bank's lending operations, with only virtual asset service providers registered under South Korea's financial transaction reporting legislation eligible to hold the pledged Bitcoin. Registered providers must comply with information security management certification requirements, Travel Rule obligations, maintain customer asset segregation, meet cold wallet storage requirements, and carry insurance or establish reserves. Jeonbuk Bank does not directly manage the wallets holding customer collateral, with the bank selecting reference measures whose calculation methods and components are publicly available.
Jeonbuk Bank developed its own digital asset valuation system using a weighted index of prices from multiple global cryptocurrency exchanges, alongside a median measure of market volatility. According to Edaily, this method is designed to reduce reliance on prices from any single exchange, where unusual trading activity or temporary market disruptions could affect valuations. The bank selected Bitcoin after reviewing its liquidity, market size and suitability for collateral valuation, considering Bitcoin's position as the largest cryptocurrency by market capitalization and trading volume. Internal stress tests examined how the collateral would perform during periods of substantial Bitcoin price declines, with results supporting the bank's assessment that Bitcoin could remain suitable collateral under stressed market conditions. High trading liquidity was another factor, since the lender would need to convert pledged assets into cash if a borrower failed to repay a loan.
The lending product follows amendments to South Korea's civil enforcement rules that took effect on October 1, establishing procedures for attaching and liquidating claims involving virtual assets. If a borrower defaults, Jeonbuk Bank can seek recovery through court-ordered sale of the pledged cryptocurrency, with proceeds used to settle outstanding loans without requiring the bank to receive the Bitcoin directly. The revised framework establishes procedures for enforcing security interests through court-supervised processes, providing a legal route for recovering Bitcoin collateral. This arrangement was developed to keep the bank's role within conventional lending and collateral recovery procedures while leaving cryptocurrency custody and asset handling to registered service providers.
The Bitcoin lending product represents the first commercial result of Jeonbuk Bank President Park Chun-won's strategy to develop the institution into a crypto-focused bank. According to Edaily, Park has identified digital assets as an important part of future financial infrastructure and directed the bank to build expertise in the sector. Jeonbuk Bank has already developed experience providing real name deposit and withdrawal accounts to cryptocurrency exchanges, making it the only regional bank in South Korea offering such arrangements. A dedicated team of blockchain and digital asset specialists has been examining payment systems, remittances and stablecoin services, with the bank conducting technical proof of concept projects and working with outside technology companies on an integrated wallet. The proposed service would bring conventional bank accounts and digital asset wallets into a single user interface, allowing customers to access both services through one platform.
