South Korea first bank-backed Bitcoin loan

[m2017]

Bitcoin-backed loans offered from a traditional bank, or loans from Celsius/Blockfi/Genesis before they imploded, which one is more appealing to you?

You’ve answered your own question right there. In that case, you’re better off taking out a secured loan from a traditional bank (despite the aversion some bitcoiners have toward the traditional system), as it proves to be a more reliable option thanks to regulatory oversight - something else bitcoiners aren't exactly fond of, either.

It looks like BTC is becoming collateral for loans at actual banks. Jeonbuk Bank, bank in South Korea has offered country first loan that is collateralized by Bitcoin.

What are the terms for a loan secured by bitcoin? Will the bank pay the client interest for holding their bitcoin? How could it be otherwise, given that bitcoin is an appreciating asset?

Note, this is NOT Crypto lending platform. Its regular bank that will offer loans that you can use BTC as collateral for. So it had to meet series of requirements to offer such a loan as any other bank.

Well, now even the banks that used to hate bitcoin are starting to acknowledge this asset and offer related services. That’s how bitcoin is gradually conquering new frontiers.

What makes it unique is if someone defaults on such a loan, bank cannot go onto an exchange and sell the BTC. Instead it must go through the legal process and ask court for an order to sell. This can now be done thanks to new civil enforcement rules that go into effect on October 1st 2026. Its important because it creates framework for Banks to be able to take and sell crypto assets in certain situations.

From the client's perspective, shouldn't this be a matter of indifference? After all, having handed over their assets, they received loan funds in return; consequently, if the bank fails to return the assets, the client has already received the money (making it essentially akin to a sale).

Of course, in the traditional financial system, everything must adhere to the letter of the law, and arbitrary actions by banks are unacceptable; therefore, clear rules would certainly be beneficial in any case.

It will be interesting to see how this progresses, but it definitely seems like BTC becoming an acceptable form of collateral at mainstream Bank is a big deal.

It’s significant, yet why isn't bitcoin rising on this news? Isn't this a positive news? That’s just how it always goes.

At least in one bank, bitcoin has finally gained tangible "weight".

[stompix]

No it doesn't!...

Not sloppy language. CoinDesk, Cointelegraph and Edaily all report that Jeonbuk set it up in a form that can be sold after judicial decision, instead of including a private sale clause.

Since it is under regulations in Korea, a registered custodian, not the bank, would keep the BTC, which means that it cannot unilaterally sell it. Also way to execute such judicial sales of the digital assets is stipulated in the revised Execution Rules (effective as of Oct 1, 2026). It likely did it on purpose considering the legal framework.

You're repeating what these quota article publications are saying!

The bank doesn't sell the coins because at the moment of the contract, they are not taking charge of them, you are losing custody of them to a third-party custodian, the bank gives you the money, and the custodian is now in an agreement with the bank, as long as the bank does not ask for the money, they have no reason to sell. At no point in this whole charade would the trustee of this agreement be forced to seek a court order to terminate the collateral , the bank does not have to own or directly hold the Bitcoin to have enforceable rights over it you have already given those rights to them the moment you signed the agreement.

The whole confusion is that the bank doesn't need to sell a thing, it doesn't need to seek repayment because the money they gave you is already pledged by the 3rd party, right there in the Korean version:

The system was designed so that the bank does not directly acquire virtual assets even during the stages of loan recovery and the execution of collateral rights.

The revised Civil Execution Rules, effective from October 1, establish procedures for the seizure, monetization, and execution of collateral rights regarding claims for the transfer of virtual assets, and stipulate that virtual assets can be monetized through measures such as court orders for sale.

The misleading part is that virtual assets couldn't have been monetized before; they can now and the bolded "such as" doesn't make court orders mandatory!

Think for a moment, who the hell would try to play this game, waiting for court decisions for months when their assets might tumble 30% because Trump posted something on x?

[Munshi Prem Chand]

...

Yes, that raises concerns about whether BTC price might drop 30%+ during the court process, which is a valid question.
But as for your liquidation point, as reported by CoinDesk, Cointelegraph and Edaily, in case of loan default, BTC can be sold through a process such as court-ordered sale based on the recently amended Civil Execution Rules. I think the Edaily article is using “such as” so that it leaves a chance of there being other ways of asset recovery. But all media reported that its court ordered sale and not through private power of sale. Also since BTC will be held by a registered third party custodian, there is no stage where the bank will have physical/legal possession of BTC, so it wouldnt be able to conduct private power of sale unilaterally either. So the product itself is based on the new civil execution method for collateral recovery and doesn't have an automatic liquidation process like we normally see in the crypto world.

[Alpha Marine]

I'm more concerned about the process of getting the Bitcoin back after you pay the loan. Because you will give the Bitcoin to a service like an escrow to hold. The bank will get the Bitcoin from the escrow through a court order if you fail to pay. So if you pay the loan on time, how will you get the Bitcoin back from the escrow?
Would you and the bank simply tell the escrow to transfer it back to you, or would you need a court order too?

You’ve answered your own question right there. In that case, you’re better off taking out a secured loan from a traditional bank (despite the aversion some bitcoiners have toward the traditional system), as it proves to be a more reliable option thanks to regulatory oversight - something else bitcoiners aren't exactly fond of, either.

I don't mind taking a secured loan from a traditional bank, but you would still need collateral in that case. It will just be something else instead of Bitcoin.
I don't think anybody who will be able to get a non-collateral loan from a bank will go to another bank that will require his Bitcoin as collateral.

[Dunamisx]

Be careful when receiving any offer from the government that tends to be an opportunity for you through any Bitcoin or crypto initiative, because it is going to benefit them more than you think it will benefit you. Bitcoin could give you more benefits than you may think, and you don't have to go to any centralized authority before you go to achieve your target as needs arise. Just take your time to plan well and avoid taking a government loan, even if it's in Bitcoin.

[Franklyn-wood]

It will be interesting to see how this progresses, but it definitely seems like BTC becoming an acceptable form of collateral at mainstream Bank is a big deal.

It's not actually a big deal but this is not something I find very appealing, and I'm not sure I would ever be willing to do it. What is the point of taking out a loan and using my Bitcoin as collateral when I can simply sell a small portion if I urgently need money? If Bitcoin is the only asset I have available, I would rather sell just enough to take care of my needs and buy back later when I'm financially stable again.

I don't like the idea of giving a bank or any other third party access to my Bitcoin. In fact, it's the last thing I would want a bank to know I own. One of the things I value most about Bitcoin is having control over my own money without having to depend on a third party. So, why would I put that control at risk just to take out a loan? As far as I'm concerned, I'd rather reduce my Bitcoin holdings temporarily than put my coins in someone else's hands and risk losing them.

It looks like the bank are will to help people with loans, but disguised under the offer by giving out loans and having access to people's holding. What if something happens to the Bitcoin, as in some or all the coin way stolen after paying back the loan to the bank.
It's better to sell some part of the holding and solve whatever problem on ground that exposing ones holding to the bank which might later become means orf taxing, and also attract greedy bank officials into monitoring his investment to know his worth.

[sunsilk]

The bank’s name alone wouldn’t decide it for me. I’d want to know who holds the BTC

Is it possible that there will be a third-party care taker of the bitcoin collaterals on that bank? Because the first thing I've thought of that it is the bank that will hold all of those btc collaterals.

what happens if its price falls sharply, and how the collateral is returned after repayment. Those details would make the comparison with a crypto lending platform much more meaningful.

It's advisable when taking a loan from our bitcoin, it's best to put the 10% to 30% Loan-To-Value (LTV) ratio.

You don't borrow 70% and above value from the bitcoin you'll give to the bank as the collateral and that's to protect yourself from paying more interest if crash happens to avoid margin call.

[stompix]

...

Yes, that raises concerns about whether BTC price might drop 30%+ during the court process, which is a valid question.
But as for your liquidation point, as reported by CoinDesk, Cointelegraph and Edaily, in case of loan default, BTC can be sold through a process such as court-ordered sale based on the recently amended Civil Execution Rules. I think the Edaily article is using “such as” so that it leaves a chance of there being other ways of asset recovery. But all media reported that its court ordered sale and not through private power of sale.

Because there are two separate issues
- the collateral no longer has enough value to cover the loan; this will trigger a change of ownership
- the customer fails to cover his loan payments, but the collateral is still there, this will need a court order since the value of the assets still in control of the trustee is higher than the remaining loan, in this case you need a court order to proceed
But whoever thinks this willbe somesort of civil lawsuit with back-and-forth arguments is mistaken; this will be just a claim that will be dealt in 10 minutes.

[Munshi Prem Chand]

Because there are two separate issues
- the collateral no longer has enough value to cover the loan; this will trigger a change of ownership
- the customer fails to cover his loan payments...this will need a court order

Interesting, where is this dichotomy coming from? I take it from what you write that in cases of undercollateralization there is different track for dealing with defaults under the Korean civil enforcement law concerning secured claims than for other reasons for default?

That is a theory, but not something Ive seen mentioned in any of the reporting thus far which all uniformly mention only court-ordered sale as the recovery method in the case of defaults for any reason, so it might be helpful to provide some additional context. Unless of course its something unique to this product that simply hasnt been mentioned, in which case disregard.

[#CapsLOck]

Interesting note, one thing I find interesting is that approval of loans secured by Bitcoin will be impacted by court approval. While Bitcoin trades around the clock, court proceedings take time, it may safeguard borrowers against arbitrary liquidation. What about a borrower's default during a big market meltdown? When the bank is allowed to sell the collateral, it may be worth much less than it was when the bank bought it. This will place an extra risk on the lender as well as the borrower. I wonder if banks will be more likely to do the former, or the latter. The true meaning of this legislation will be what happens in the event of a long Bitcoin slump.

[OcTradism]

Interesting note, one thing I find interesting is that approval of loans secured by Bitcoin will be impacted by court approval. While Bitcoin trades around the clock, court proceedings take time, it may safeguard borrowers against arbitrary liquidation. What about a borrower's default during a big market meltdown? When the bank is allowed to sell the collateral, it may be worth much less than it was when the bank bought it. This will place an extra risk on the lender as well as the borrower. I wonder if banks will be more likely to do the former, or the latter. The true meaning of this legislation will be what happens in the event of a long Bitcoin slump.

Bitcoin is volatile, Bitcoin market is unpredictable so such loans with any coming regulations will still be risky in my opinion. I will never take such loan and deposit my bitcoin as a collateral for my risky loan. I am not young so I understand about risk and uncertainty in life, while through my experience I know about value and potential of further growth of Bitcoin.

With all my experience so far, I will take care of my bitcoin with as most carefulness as possible because I know that I can work and get money, any hard times will go and even with a jobless situation, I will find new jobs, work and get money again. While if I lose my bitcoin, I will struggle to buy it back especially with very good growth of Bitcoin over time. With same amount of capital, I will be able to buy less bitcoin over time.

[TastyChillySauce00]

Bitcoin-backed loans offered from a traditional bank, or loans from Celsius/Blockfi/Genesis before they imploded, which one is more appealing to you?

It looks like BTC is becoming collateral for loans at actual banks. Jeonbuk Bank, bank in South Korea has offered country first loan that is collateralized by Bitcoin.

Note, this is NOT Crypto lending platform. Its regular bank that will offer loans that you can use BTC as collateral for. So it had to meet series of requirements to offer such a loan as any other bank.

What makes it unique is if someone defaults on such a loan, bank cannot go onto an exchange and sell the BTC. Instead it must go through the legal process and ask court for an order to sell. This can now be done thanks to new civil enforcement rules that go into effect on October 1st 2026. Its important because it creates framework for Banks to be able to take and sell crypto assets in certain situations.

It will be interesting to see how this progresses, but it definitely seems like BTC becoming an acceptable form of collateral at mainstream Bank is a big deal.

Source: https://www.coindesk.com/business/2026/10/12/south-korea-just-got-its-first-traditional-bank-loans-backed-by-bitcoin

Lending platform still more appealing because better LTV, I suppose bank backed bitcoin loan is going to be very conservative on the LTV? moreover there is also risk of full legal recourse if the collateral asset that got liquidated can't cover the debt. In lending platform, it'd become bad debt for lender and have no legality to pursue other assets.

The new civil enforcement rules also giving fast track, standardized way for the lender to liquidate the bitcoin, seizing the right to claim rapidly, in a way it resembles lending platform that we're used to a lot.

[macson]

Bitcoin-backed loans offered from a traditional bank, or loans from Celsius/Blockfi/Genesis before they imploded, which one is more appealing to you?

For me, whether it's offered by a bank or an online platform, Bitcoin-based loans are basically the same, not that different except for the regulations. AFAIK, banks have regulations that are more closely monitored by regulators, so they are more careful in providing loan services to users. But the scheme should be more or less the same.

But I don't really see Bitcoin-based loans as that appealing. I mean, it's better for me to put up other stuff as collateral rather than giving my Bitcoin to a third party.

At least if I collateralize something else, if there's a problem, the regulations are clearer in my country, whereas with Bitcoin-based loans, I just have no idea where my Bitcoin will end up being used by that party. They could claim that the Bitcoin isn't lent out to anyone else anymore, but that's just their claim, no one really knows for sure.

[Munshi Prem Chand]

Lending platform still more appealing because better LTV, I suppose bank backed bitcoin loan is going to be very conservative on the LTV? moreover there is also risk of full legal recourse if the collateral asset that got liquidated can't cover the debt. In lending platform, it'd become bad debt for lender and have no legality to pursue other assets.

The new civil enforcement rules also giving fast track, standardized way for the lender to liquidate the bitcoin, seizing the right to claim rapidly, in a way it resembles lending platform that we're used to a lot.

Also keep in mind that while its being described as this fast track its still court ordered legal process for debt collection, not an internal trigger like with the old platforms that resulted in a nearly immediate liquidation.

You probably also expect a bank to ask for smaller loan to value given they are bit more conservative.

Though on other hand if they liquidated your BTC and were still out of pocket they could come after you for it through normal judicial means instead of just writing it off as bad debt.

For me, whether it's offered by a bank or an online platform, Bitcoin-based loans are basically the same, not that different except for the regulations. ... They could claim that the Bitcoin isn't lent out to anyone else anymore, but that's just their claim, no one really knows for sure.

Some borrowers might be more comfortable with traditional collateral rather than Bitcoin, both in terms of custody issues and wondering what state their coins would be in once used as collateral. However Jeonbuk will not be taking possession of collateral itself and will use registered third party custodian, so at least the rehypothecation risks are one level removed how transparent these arrangements are is debatable.

Its also worth remembering that this is commercial bank so it will be subject to much heavier regulation that crypto lending platforms have been in the past. This changes risk dynamics but it doesnt necessarily make the product any safer.

[Christopher Hubbard]

Honestly, a bank-backed BTC loan sounds much more appealing to me than the old Celsius/BlockFi model. The return might be less exciting, but at least there’s a legal framework and the lender can’t just liquidate everything however it wants.
What’s interesting here is that Bitcoin isn’t being treated like some exotic asset anymore - it’s slowly becoming collateral in the same way other financial assets are. That feels like a much bigger step for adoption than another round of hype.

[yudi09]

By extending loans to corporate clients backed by Bitcoin, authorities in that country have already assessed the pros and cons regarding Bitcoin’s value; thus, the mention at the end of this article that the bank will review the loan-to-value ratio and margin call thresholds indicates that, long before this decision was made, they had already prepared for all its consequences—which is why I view this as a positive step. It is positive from the perspective that Bitcoin is a sound asset and further reinforces the view that Bitcoin is not an asset that is seen as a gateway to negative actions.