Jeonbuk Bank, a subsidiary of JB Financial Group (175330), has begun issuing won-denominated loans backed by Bitcoin, according to a report from Edaily published Monday. A bank representative told Chosun that at least one loan has already gone out to a corporate client, though the loan amount, interest rate and loan-to-value terms remain undisclosed.
The product is limited to corporate borrowers seeking working capital, and Bitcoin is currently the only digital asset the bank accepts as collateral. Jeonbuk Bank picked Bitcoin for its market capitalization and trading volume, arguing that these give it stronger price discovery and benchmark reliability than other coins. The bank ran its own stress tests and found Bitcoin held its value as collateral even through sharp price drops, and that its liquidity makes it easy to sell off at repayment time.
How the collateral structure works
Jeonbuk Bank never takes direct ownership of the pledged Bitcoin. The coins sit with a third-party custodian registered as a virtual asset service provider under South Korea's Act on the Reporting of Specific Financial Information. That registration requires Information Security Management System certification and Travel Rule compliance. It also brings further obligations under the Virtual Asset User Protection Act, covering segregated custody and cold wallet storage minimums, plus a requirement to hold insurance or set aside reserves.
South Korea's Virtual Asset User Protection Act took effect in July 2024 as the country's first dedicated law on custody and investor protection for digital asset exchanges, so the custody rules Jeonbuk Bank relies on here predate this loan product by more than a year.
The bank built its own pricing system for the collateral rather than depend on a single exchange. It uses a weighted average of prices from multiple global exchanges, combined with the median of market volatility indicators, as its benchmark. The formula and its components have been made public.
Legal groundwork behind the loan
The loan rests on amendments to South Korea's Civil Enforcement Rules that took effect October 1. Per the Supreme Court, the revised rules set out procedures for seizing and liquidating claims tied to virtual assets, including court-ordered sales. If a borrower defaults, Jeonbuk Bank does not seize the Bitcoin itself. A court-ordered sale liquidates the collateral, and the bank recovers its loan from the proceeds, keeping crypto off its books at every stage.
Bank lending against Bitcoin already exists elsewhere. JPMorgan Chase started offering Bitcoin-backed loans to institutional clients last March, and Switzerland's Signum Bank runs a comparable facility. Both programs operate under legal systems that already had settled rules for digital collateral, which is why South Korea's rule change on October 1 had to come first before any domestic bank could attempt something similar.
What this signals for Korean banking
Jeonbuk Bank calls the loan the first concrete result of a "Crypto Bank" vision pushed by President Park Chun-won, who wants the bank to build digital asset capacity ahead of rivals. The bank already issues real-name deposit and withdrawal accounts to virtual asset exchanges, something most regional banks in Korea do not offer, and it runs a team working on blockchain proof-of-concept projects for payments, remittances and stablecoins.
The move lands a few months after South Korea's largest commercial banks, including KB Kookmin, Shinhan and Woori, filed trademark applications tied to won-pegged stablecoins in 2025, part of a wider scramble among Korean lenders to claim ground in digital asset infrastructure before the Financial Services Commission settles its stablecoin issuance rules. Jeong Sang-hoon, Executive Vice President of the Digital Division at Jeonbuk Bank, said the loan was built "within the framework of current laws and regulations" and designed to use "existing bank lending and collateral management systems without directly holding virtual assets." He added that the bank will keep adjusting its digital asset capabilities as the regulatory picture shifts.
Tanya Petrusenko
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