South Korea first bank-backed Bitcoin loan

[d5000]

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.

The point is that your Bitcoin can continue to appreciate while the loan runs. And the fact that the long term trend still appreciates, can make this an attractive option if you design the contract in a way where you wouldn't be forced to liquidate in the case of a dip. This would mean to overcollateralize it a lot.

If I understand it correctly the "deal" basically boils down to: it is a profit for you if your Bitcoins appreciate more in the time period than the interest rate you would have had to pay in the same time period.

It doesn't even have to appreciate exactly in that time period. For example: Bitcoin is at 80,000 and your loan's deadline is 2 years, and in these 2 years Bitcoin declines to 70,000 just because you catched a bear cycle - only then to appreciate again and go to 100,000. In this case you still have profited.

This also means that the kind of contract is most attractive as long as Bitcoin appreciates more than a common interest rate. It is still interesting if the expected Bitcoin appreciation allows you to significantly lower the "effective" interest rate (e.g. if you need the liquidity to start a business). But of course the contract is quite risky.

I also have some problems with that kind of contract because you give up self-custody, but people who already are storing their Bitcoins at exchanges and ignore NYKNYC should have no problem with such a contract.

[Munshi Prem Chand]

...

Additionally, in most jurisdictions, selling your BTC would be a taxable event (capital gains). By comparison, taking out a loan would not be a disposal event.
Even in case that BTC remained flat or did not appreciably change during the duration of the loan, you may still prefer to take out a loan vs. sell in order to avoid a taxable event. This argument is independent of argument above about appreciation, but they lead to the same result. And of course tax implications argument would be even more significant for larger positions and greater holding periods, which are situations where the tax bill would likely be significant.

[TastyChillySauce00]

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.

I think the legal recourse is the most important thing, i'd be mad if there is a flash dip which causes the bank to liquidate my bitcoin and my other assets are also seized only for bitcoin to recover back again soon. Lending platform use OSM with 1 hour delay to mitigate flash crash and TWAP for averaged price oracle.

It would be important to know how fast from flash dip to court ordered legal process for debt collection before liqudiation takes place in comparison to decentralized lending platform.

[Peanutswar]

But if that's the case is the user must need to deposit their bitcoins into the bank cryptocurrency wallet as part of the collateral there is a lock in period after the maturity date of the loan. For me its good initiate for people who have bitcoin and wanted to loan a bank like they have the capability but i can see here is the cons, why? because you took a loan, and they take your bitcoin sad here is there is a lock in period, if the market crashes its lower the value of your bitcoin and you can't do anything about it. You can't sell; you can't cut loss. I dont trust banks into crypto nowadays _{(or because just had a bad experience)}

[Botnake]

This is surely a move to encourage Bitcoin adoption in South Korea. It's even more interesting to learn that borrowers maybe able to access loan without selling their Bitcoin, long-term holders who need cash but doesn't want to give up their position will find that very useful. That said, the risky part is that, depending on the bank's term, if Bitcoin's price falls significantly, the collateral might no longer be enough to cover the loan. They should show us the loan-to-value ratio as well as the conditions that talk about the fate of a borrower when the market turns against them.

If that's the case, then the bank will require additional deposit of bitcoin to meet the required value, or add another form of collateral that is acceptable by the bank. With this, I find it more hassle on my part because the moment you fail to pay your loan, you won't only lose your bitcoin alone but also your other collateral and that makes it very worrying. Though its actually helpful for those who are in urgent need of cash, but its undeniably risky too. Some may grab the offer desperately, but personally, I prefer to find other options that would not compromise my bitcoin.

[HajiBagi]

If we look carefully at what is stated in the articles, at first reading you will think that it is a good step that the bank backed bitcoin so that anyone who wants to borrow from them can borrow. Where we will look carefully at the market target of the bank is the bitcoin holders and believers in it.

Literally speaking, it is a good news, due to it adds a boost to the adoption of Bitcoin, but if I were the only one who was asked, I would prefer the usual way of using other collateral, not bitcoin. Due to it seems like it is difficult if you miss a payment because you will still go to court if I understand what I read in that news article correctly, this is just my opinion.

It will be good idea if it is usual other collateral that is not bitcoin, it is a good news for bank to be able to offer loans but when it comes to something that related to bitcoin and loan i don’t joke with it, i can take a loan from a bank that doesn’t involve btc, pay back with btc or using my btc as a collateral, although this is another way of encouraging bitcoin adoption, but when you look at the way many banks operate, you will not want to take any loan from them.

Some banks rules are very strict and when you don’t pay your loan in time they will act the way you don’t expect them, and with the court involved according to the post, it will be very risky, most especially for people that can’t pay in time, seeing bitcoin going to this level is a big improvement but whe it comes to loan, i always think it’s a risk move.

[Y3shot]

If this bank is also performing P2P exchange for Bitcoiners, then it is a good one. However, if they are not and are only demanding Bitcoin investments as collateral, then it means they are just interested in selling customers Bitcoin who won't be able to meet the loan that was taken. The bank has always been giving out loans with other forms of collateral, and I wonder why they are demanding Bitcoin right now.

If the bank wants to engage in anything related to Bitcoin, they need to fully accept Bitcoin, and with this, I think they have the right to demand people's investments as collateral for loans.

[Findingnemo]

I don't understand why anyone would do that, why not just sell it? Rather than taking a loan with your money which is like we are just feeding what the banks are thriving on, basically from our deposits and providing loans at high interest.

I am never going to buy that paying interest to use my money (Bitcoin) is a really smart idea.

[IDRIS22]

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

The conditions for borrowing are more stringent than when using other forms of collateral such as the loan can only be used for operating cost only which still limit the full potential of bitcoin. This is the first bank to approve such let see if other banks will follow suite

[Antotena]

...

Additionally, in most jurisdictions, selling your BTC would be a taxable event (capital gains). By comparison, taking out a loan would not be a disposal event.
Even in case that BTC remained flat or did not appreciably change during the duration of the loan, you may still prefer to take out a loan vs. sell in order to avoid a taxable event. This argument is independent of argument above about appreciation, but they lead to the same result. And of course tax implications argument would be even more significant for larger positions and greater holding periods, which are situations where the tax bill would likely be significant.

How do they manage the risk of liquidation? Or does it mean you don't control what you borrow. Why not use Defi instead of banks. I have concerns regarding this bank approach, what are you going to do if suddenly they say your Bitcoin is taint and you need legal process to get your Bitcoin, what if they decided not to give back your Bitcoin? You can't do anything than dance to their tune. It's a good adoption but lending through the most centralized institutions is bad.

If this is the banks that we know, they will most likely make used of the Bitcoin for other things and if care is not taken, to might not get back your Bitcoin at that instant. Knowing that the general problem of banks is liquidity management, this will not last than anticipated. Maybe the institutions will patronize them for emergency, regular users will stay away.

[Munshi Prem Chand]

It would be important to know how fast from flash dip to court ordered legal process for debt collection before liqudiation takes place in comparison to decentralized lending platform.

However, Jeonbuk can only move as fast as court process will allow them to. Therefore, if BTC were to flash crash and price came back within 5 mins of it first dipping, and said dip was low enough to liquidate you, physically they wouldn’t be able to liquidate you as the price had not been low enough long enough for them to have filed the paperwork etc. So ironically this process may well offer more protection in a flash crash situation than say a very naively implemented DeFi product that could liquidate you in the same block as its oracle updated price. Better implementations would of course have more nuance, TWAP oracles being an example of better protection against flash crashes.

On the other hand, if BTC were to take sustained drop, they could potentially be exposed to further downside over the course of days or weeks that it takes the court process to conclude. Thus ironically offering better protection for borrower against flash crashes, but worse protection against further drops, which is worse both for Jeonbuk obviously, but also potentially for borrower in the sense their leftover collateral may also be subject to recovery if there is shortfall. Nobody seems to have said how long the court process would take in this situation, which would be key info.

[CryptopreneurBrainboss]

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.

Big win for adoption I'll say but it isn't surprising that banks are beginning to considered loans backed with Bitcoin, why wouldn't they though when the Bitcoin they're hodling as collateral is motr valuable than the loan that they're getting so they aren't doing you any favours because if you forfeit the loan, then you're doing them more good.

This is so because the banks gets to profit from the Bitcoin that they're holding. we already have platforms that gives loan with Bitcoin collateral and they might even be more fair in their percentages than banks, exchanges even do it so I'm not that surprise to see banks catching up.

it was them that is missing out and probably other banks do the same before the opportunity gets missed because people are trusting exchanges and other loan platforms more than traditional banks but nevertheless kudos to the south Koreans for being the first to do thks. another win for Bitcoin.

[Emitdama]

If this bank is also performing P2P exchange for Bitcoiners, then it is a good one. However, if they are not and are only demanding Bitcoin investments as collateral, then it means they are just interested in selling customers Bitcoin who won't be able to meet the loan that was taken. The bank has always been giving out loans with other forms of collateral, and I wonder why they are demanding Bitcoin right now.

If the bank wants to engage in anything related to Bitcoin, they need to fully accept Bitcoin, and with this, I think they have the right to demand people's investments as collateral for loans.

To be fair, they are not selling Bitcoin until you default on your loan, so I doubt it is a big deal. Plus, the bank is taking a huge risk as well. Because if they ask someone for 1 bitcoin for a 50k dollar loan, and then they give 50k dollars, and keep that 1 bitcoin, they are in profit, right? Because of the interest, they need to make a profit one way or another.

However, what if tomorrow morning we wake up and bitcoin is 40k? Then they are in a losing situation, and the bank made a bad choice. That may sound like not a great possibility to you; why would we go to 40k right now, correct? Well, when we were at 125k, if they asked for 1 bitcoin for a 100k dollar loan, there was a moment when we reached 60k; that means they would have lost a lot more, so it does happen.

[SUPERSAIAN]

I tried to check the borrowing rate and interest, but it was not included in the article, as that’s important if you ask me. Bitcoin is volatile, and borrowing against it – what if a dip comes and the value of the collateral is reducing close to the loan amount taken? What will be the action taken, as banks will always want to protect their interest?

Bitcoin-backed loans might appear helpful to those who don’t want to sell their Bitcoin, but the policy and risk of losing that Bitcoin to the lender are on the high side that’s if interest and handling fees won’t be the first to rip you off.

While it may sound like a sound and logical idea, using Bitcoin as collateral carries certain risks. Given the price volatility of Bitcoin, I wonder what the long-term consequences of such a system might be, naturally, a bank is obligated to protect its own interests, and it will act accordingly.

An individual who holds onto Bitcoin in hopes of benefiting from potential future appreciation might by taking on debt end up facing the very situation they sought to avoid. Losing their Bitcoin due to market conditions would be the worst-case scenario.

[Japinat]

I don't understand why anyone would do that, why not just sell it? Rather than taking a loan with your money which is like we are just feeding what the banks are thriving on, basically from our deposits and providing loans at high interest.

I am never going to buy that paying interest to use my money (Bitcoin) is a really smart idea.

Selling their bitcoin could mean totally lose their bitcoin forever, but taking it as a loan collateral, they can still get it back once the loan is fully paid. But if they can't pay the loan in time, that would still compromise their bitcoin and probably lose it forever.

But if you don't want complications, you can just sell a portion of your bitcoin and hold the remaining part. After all, bitcoin is intended to sell, but you should do it when the perfect timing comes or when your goal price has been achieved already.

[Sanitough]

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.

Big win for adoption I'll say but it isn't surprising that banks are beginning to considered loans backed with Bitcoin, why wouldn't they though when the Bitcoin they're hodling as collateral is motr valuable than the loan that they're getting so they aren't doing you any favours because if you forfeit the loan, then you're doing them more good.

This is so because the banks gets to profit from the Bitcoin that they're holding. we already have platforms that gives loan with Bitcoin collateral and they might even be more fair in their percentages than banks, exchanges even do it so I'm not that surprise to see banks catching up.

it was them that is missing out and probably other banks do the same before the opportunity gets missed because people are trusting exchanges and other loan platforms more than traditional banks but nevertheless kudos to the south Koreans for being the first to do thks. another win for Bitcoin.

You made a good point here. While this could be another achievement for bitcoin and seems to bring another opportunity for bitcoin holders, but the bottom line is traditional banks are still putting us into their trap and own our bitcoin in no time. They may show it like they're fair and square, but the real objective here is to entrust our bitcoin to them without doubt, and from that moment, we start to lose our privacy and full ownership of bitcoin.

[Findingnemo]

I don't understand why anyone would do that, why not just sell it? Rather than taking a loan with your money which is like we are just feeding what the banks are thriving on, basically from our deposits and providing loans at high interest.

I am never going to buy that paying interest to use my money (Bitcoin) is a really smart idea.

Selling their bitcoin could mean totally lose their bitcoin forever, but taking it as a loan collateral, they can still get it back once the loan is fully paid. But if they can't pay the loan in time, that would still compromise their bitcoin and probably lose it forever.

But if you don't want complications, you can just sell a portion of your bitcoin and hold the remaining part. After all, bitcoin is intended to sell, but you should do it when the perfect timing comes or when your goal price has been achieved already.

It is still not make sense to give our bitcoin and also pay interest for it, maybe a good one if it is a short-term loan but it can be just taken with no collateral at all like personal loan or credit against our credit limit but long-term loans with bitcoin as collateral is not a good idea in my opinion. A debt free life is a stress free life and when we are stress-free, then we can focus on things better, just from my personal experience.

[Munshi Prem Chand]

If this is the banks that we know, they will most likely make used of the Bitcoin for other things...

I already explained that all sources mention the BTC being held at 3rd party registered custodian, not at Jeonbuk. As such there is no float or usage profit Jeonbuk could get by using the BTC for example in a different product or to manage liquidity, as they would only have credit claim against the collateral, so requiring a court to enforce instead of Jeonbuk just transferring the collateral. I believe this is the whole point of the 3rd party custodian solution, otherwise rehypothecation and liquidity management risk would still exist. So Jeonbuk profits from interest only, as is the case in every other collateralised loan.

@CryptopreneurBrainboss, when you write “banks get to profit from the Bitcoin that they’re holding,” are you assuming that banks would be the custodians?


Note: I am not in the favor of bank I am writing which I read.

[Yablee0]

Fine, it's a welcome development that people has started seeing the real value and potentials in Bitcoin adaption no doubt. But what I wouldn't take is to take the risk of depositing something as valuable as Bitcoin all in the name of collecting a loan. I wouldn't do that, even if that is the only option available. Perhaps, i will better take my ass else where or better still forget about taking the loan. Because if I'm not mistakenly any little default or delay in payment can cost you your entire Bitcoin just for mare peanut.

But if I may ask, how come about the idea of depositing Bitcoin as a collateral?  There could be something that isn't clear or maybe they has plans in dieing people's holdings. I will advise loan defaulters to stay clear.