South Korean Court Rules Cryptocurrencies Exempt from Interest Rate Cap

South Korean Court Rules Cryptocurrencies Exempt from Interest Rate Cap

A South Korean court has ruled that cryptocurrencies are not classified as money, thereby exempting them from the country’s interest rate cap on loans. This landmark decision was made in a case involving a Bitcoin loan agreement between two companies.

Case Background

The case involved a Bitcoin management company, referred to as Company A, which lent 30 Bitcoins (valued at $604,320 at the time) to Company B in October 2020. The agreement included a 5% monthly interest rate, totaling 60% annually. When Company B failed to repay the loan, Company A filed a lawsuit.

Court Decision

Company B argued that the interest rate violated South Korea’s Interest Limitation Act and the Act on Registration of Credit Business and Protection of Finance Users, which cap annual loan interest at 24%. However, the court ruled in favor of Company A, stating that the agreement involved Bitcoin, not traditional money, and thus was not subject to the same regulations.

Implications of the Ruling

The court’s decision highlights the evolving legal landscape surrounding cryptocurrencies in South Korea. By classifying cryptocurrencies as non-money, the ruling sets a precedent for future cases involving crypto loans and interest rates.

Broader Context

This ruling comes as South Korea continues to develop its cryptocurrency regulatory framework. Recently, authorities reported intercepting $184 million in cryptocurrency payments linked to tax evasion cases, signaling increased scrutiny of crypto transactions.

The court’s decision and ongoing regulatory efforts underscore South Korea’s efforts to clarify the legal status of cryptocurrencies and their role in financial transactions.