Court: "Coins Are Not 'Money'... Interest Rate Limits Under the 'Loan Business Act' Do Not Apply"

A court ruling has determined that the virtual asset lending business is not subject to the Loan Business Act and Interest Rate Restriction Act, which set interest rate caps.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Daehyun] The court ruled that virtual asset lending businesses, such as Bitcoin, are not subject to the Loan Business Act and Interest Rate Restriction Act, which set interest rate caps.

According to the court on the 5th, the Seoul Central District Court Civil Division 22 (Presiding Judge Jung Jaehee) recently partially ruled in favor of the plaintiff in the first trial of a virtual asset claim lawsuit worth about 800 million KRW filed by virtual asset fintech company A against company B, ordering "B to deliver 30 Bitcoins and Bitcoins calculated based on the interest rate to A."

Previously, from October 2020 to January of the following year, A lent 30 Bitcoins to B under a "virtual asset lending contract," receiving monthly interest of 1.5% in Bitcoins.

Thereafter, the interest rate sequentially increased to 2.5% per month and then 10% per month each time the contract was extended. However, B failed to properly repay the Bitcoins, and A filed a lawsuit.

During the trial, B argued that "A violated the Interest Rate Restriction Act and the Loan Business Act," claiming that "interest paid exceeding the maximum interest rate should be considered as repayment of the principal (Bitcoins)."

The initially agreed interest rate corresponds to an annual rate of 60%, while the current Interest Rate Restriction Act caps the annual maximum interest rate at 25%, and the Loan Business Act at 20%, thus alleging illegality.

The first trial court rejected B's claim, stating, "Bitcoin is not money." The court explained, "The Interest Rate Restriction Act and the Loan Business Act limit the maximum interest rates on monetary loans and lending of money," and "since the subject of this contract is not money but Bitcoin, these laws do not apply."

Furthermore, the court ruled, "If B cannot pay the Bitcoins, then at the time of the conclusion of the trial in July, B must pay the equivalent amount in cash calculated at the market price, approximately 26.54 million KRW per Bitcoin."

This content was produced with the assistance of AI translation services.