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Home Cryptocurrency

Korea to receive its first-ever crypto-backed loan service

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KoreaTechToday Editor by KoreaTechToday Editor
PUBLISHED: November 20, 2021 UPDATED: November 25, 2021
in Cryptocurrency, Fintech
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Korea to receive its first-ever crypto-backed loan service

The South Korean financial market is all set to receive its first-ever crypto-backed loan service. The South Korean finance firm Delio is launching its lending service that will help borrowers get loan services against their crypto assets. 

A few weeks ago, South Korea officially recognized crypto platforms that connected their financial accounts with regional Korean banks. After intervening in the crypto space on a large scale, the crypto-backed loans are considered the next big disruption in the Korean fintech market, suggest experts. 

Delio received an initial total capital of $100 million early this week. With this, the company will be making its crypto-backed loan service available for digital-finance owners and traders. According to the sources, the crypto exchanges such as bitcoins and other “authorized” currencies can be used as security while raising funds or lending finances from the company. 

Digital assets as a security is a comparatively newer concept for the economy, and the Korean govt has not yet intervened directly in the interest rate and security matters. However, the annual interest rate on such loans is likely to be set at 16%, which is similar to credit card loan services.

At present, Delio has a lending capacity of 50%, where the company can offer a loan-to-value rate against cryptocurrency. It implies that a customer with around 100 million won will be eligible for withdrawing a loan amount of around 50 million won. 

The local crypto platform, Delio, has a customer of around 2 trillion won bitcoins. The company is primarily involved in staking, wherein bitcoin users can deposit their deposits with the firm to receive an interest rate of 10% per year. This rate is typically fixed, and it is given in the form of additional bitcoins. 

Since there’s no government intervention or monitoring involved in the whole crypto-backed loan service, it may create a loop in the government tax systems. The users can avail of the loan amount without having to withdraw/sell their virtual assets. As a result, the loan service can give loopholes to evade the planned tax rules on crypto gains. 

In South Korea, the digital asset tax is 22% on crypto gains, applicable with effect from Jan 2022. This tax is levied upon crypto gains of over 2.5 million won after buying or selling any authorized cryptocurrencies. Critics have alerted crypto users who plan to invest in crypto exchanges or raise loan loans in the upcoming year. 

Although the service launch appears smooth in the Korean market, the absence of regulations may create chaos in the future. However, the crypto users are hopeful with the acceptance of crypto-backed loans and other services in the fintech economy. 

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Tags: cryptocryptocurrencykorea news

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