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

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.

Loan itself is a risky financial action so banks don't make bank-backed Bitcoin loan no longer risky.

I never give my bitcoin to anyone, any platform only because I need my money. If I need money, I will work for it while still hold my bitcoin if I can. Making loan with my bitcoin will cost my loan interest, and more important risk of losing my bitcoin as the loan collateral.

Chasing something small, satisfying short term need, are all not big reasons why I have to risk my valuable bitcoin. Many people, many institutional investors want and even are accumulating bitcoin, they want my bitcoin, and I will not lose my bitcoin cheaply because of loan and any liquidations.

That really comes down to what your reason for borrowing is in the first place. If you are doing it simply to buy more BTC, then interest rate becomes an additional risk factor.

However, if you need short term liquidity and have a reasonable means to pay off the loan, then I think it is worth considering. It is crucial to ensure that repayment of the loan does not rely on the price of BTC increasing. The price could decline even if there is still a loan outstanding.

It explains there that they only accept corporate clients, so literally not "everyone" can apply for a loan from this bank.


It's true that the interest schemes, etc., weren't really explained in detail. But in the article it says something like this:
Another article also explains how Jeonbuk Bank has developed a risk mitigation strategy to ensure the safety of bank capital and client collateral assets:
https://news.jkn.co.kr/post/1018133

So, with this explanation, the loans offered by Jeonbuk Bank should operate in accordance with the legal framework and risk mitigation they have designed. And most likely, it will always work in their favor.

From a personal point of view, one very interesting take from the Korean Bitcoin backed loan is the implications of what such a move will make for the cut of Bitcoin, and not just the loan itself.
 
For years there's always been the discussion surrounding Bitcoin being more useful, and not just a mere speculation. So being used now as a collateral to access traditional credit without selling it makes the discussion more interesting.

My only concern is being that volatility can turn an opportunity into liability in the event that prices fall rapidly.

We're seeing a future where owning Bitcoin becomes useful without the need to sell it!

In the year 2022, the collapse of Celsius, BlockFi, and Genesis resulted in withdrawals being frozen and bankruptcy filings. Some crypto enthusiasts who don't see KYC as a drawback may choose a traditional bank as a better option based on how they operate under much stricter regulations, have deposit insurance frameworks (even if the crypto collateral itself isn't insured the same way), and have a liquidation process that goes through the courts rather than a private company deciding unilaterally.

This is another reason why they might prefer a loan to selling: taxes. In many jurisdictions, selling BTC is taxable event. A loan isnt, because youre not actually selling the asset. If you bought BTC 10 years ago when it was cheap, then it will have appreciated massively and you might face huge capital gains tax bill if you sell now. With loan, you can still access liquidity without having to realise that gain.



We dont know, as Jeonbuk has yet to release an official figure. However, previous crypto lending platforms, including defunct BlockFi and Celsius, have typically maintained 25-50% LTVs on BTC, compared to 50-80% LTVs on more traditional forms of collateral like stocks and real estate because BTC is riskier. Given that Jeonbuk is regulated bank with presumably well stress-tested risk management controls, we might expect them to come in at the low end of that historical LTV range, i.e. well below 50%, to provide themselves with healthy margin of error before liquidations must occur on falling BTC prices.



Good point, and likely why thats not listed here; these are corporate secured loans, which tend to be negotiated individually other than having a published flat rate like retail product would.
Also worth noting, per snippet the other commenter posted from the Korean article, this loan program is only available to corporate customers with third party custodian, so I dont think its really comparable to a BTC backed retail loan from a crypto exchange; different risk pool, different pricing.

I read through the article op never highlights how the interest rate will work, every borrowing or lending both the borrower and the lender must have that first consideration as it's what propelled those that will go for such loan , it's a good way of promoting adoption, the challenges over the process is the volatile nature of Bitcoin and also the time frame to which the loan will last what will be the out come if one Bitcoin has already be used as collateral and for instance specific interest rate is agreed if the market dip during the pay back it will automatically sweep up all your asset to meet the interest rate if the interest , if it's non negotiable at the time of payment during dip, the idea of court granting permission is good the borrower can still adjust within the period and pay before court finished granting their order.