Key Highlights
- Jeonbuk Bank has introduced Bitcoin-backed loans, described in the report as the first such product offered by a South Korean bank.
- The service is initially restricted to corporate customers, with loan proceeds limited to working capital and other necessary business expenses.
- Bitcoin collateral is held by specialized, registered custodians rather than directly controlled by the bank.
South Korea’s Jeonbuk Bank, a subsidiary of JB Financial Group Co., Ltd., has begun offering won-denominated loans backed by Bitcoin.
According to an October 12 report by Edaily, the service is initially limited to corporate customers raising working capital. Loan proceeds are restricted to expenses necessary for business operations. The bank said it would consider expanding the service based on regulatory changes and market demand.
The Bitcoin used as collateral is held in the management system of a specialized custodian. Jeonbuk Bank does not hold ownership of the virtual assets or exercise direct control over them. Eligible collateral is currently limited to Bitcoin, and loan proceeds may be used only for funds necessary for corporate business operations.
Collateral selection and risk assessment
The bank selected Bitcoin as eligible collateral because it has the largest market capitalization and trading volume among virtual assets, providing greater price transparency and a more established market benchmark.
Jeonbuk Bank said it conducted its own stress tests and found that Bitcoin could maintain stability as collateral during sharp price declines. It also cited the asset’s high liquidity as a factor that could make liquidation more straightforward at the time of repayment.
The product is structured so that the bank does not directly acquire the virtual assets if a security interest is enforced. Amendments to South Korea’s Civil Enforcement Rules, which took effect on October 1, established procedures for the seizure, liquidation and enforcement of security interests involving claims for the transfer of virtual assets. These rules provide for liquidation through court-ordered sales and related procedures.
Under the bank’s arrangement, even if a borrower defaults or another enforcement condition arises, Jeonbuk Bank does not receive the Bitcoin directly. Instead, the collateral is liquidated through court-supervised sale or other applicable enforcement procedures, with the bank recovering its outstanding loan receivables from the proceeds.
Custody and valuation framework
Custody of the Bitcoin collateral is restricted to virtual asset service providers registered under South Korea’s Act on the Reporting and Use of Specific Financial Transaction Information.
These providers must hold Information Security Management System certification and comply with the Travel Rule and requirements under the Virtual Asset User Protection Act. The requirements include segregated custody, maintaining a specified cold-wallet storage ratio, and obtaining insurance or setting aside reserves.
Because the bank does not manage the wallets itself, related operational risks are addressed through these statutory requirements.
Broader context
South Korea is continuing to develop its regulatory framework for digital assets.
On October 1, the Financial Services Commission proposed new rules covering securities issued and traded using distributed ledger technology. Those proposed revisions would allow stocks, bonds, funds, and certain fractional investment securities to be issued in tokenized form. They are scheduled to take effect on February 4, 2027, following a public comment period.
A Chainalysis report covering July 2025 to June 2026 showed Eastern Asia’s crypto economy totaling approximately $1.2 trillion, with South Korea recording the largest national figure at $449 billion.
Overseas, JPMorgan Chase also launched Bitcoin-backed loans for institutional clients in March, and Switzerland’s Sygnum Bank offers similar facilities.
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