In a recent case involving two firms, a South Korean court, specifically the Seoul High Court’s Civil Division, has ruled that Bitcoin (BTC) is not classified as money and is therefore not subject to interest rate regulations in business transactions.
The ruling came after the court deemed it impossible to set interest rates for Bitcoin lending, stating that cryptocurrency does not fall under the purview of national lending business laws.
South Korea’s Ruling Based on an ongoing case
The case revolved around a contract signed by the two unnamed firms in October 2020. Company A, described as a fintech company working with crypto-assets, lent BTC 30 to Company B for a three-month period.
The terms of the contract specified that Company B would pay BTC 1.5 (equivalent to 5% of the total) for the first two months and BTC 0.75 (equivalent to 2.5%) for the final month. However, issues arose when Company B failed to repay the borrowed Bitcoin as agreed.
Company A extended the loan period and adjusted the interest rate, but Company B still failed to fulfill its obligations. In response, Company A filed a civil lawsuit against Company B. Company B argued that Company A violated the Interest Limitation Act and the Loan Business Act by setting interest rates above the legal maximum.
However, the lower court rejected Company B’s argument, stating that the contract pertained to crypto assets rather than money, making interest restriction and loan business laws inapplicable. Company B appealed the decision to the High Court, but the original ruling was upheld. The presiding judge determined that Company B should deliver the Bitcoin based on the contractual interest rate.
The judge clarified that the statutory interest rate on debt under commercial law can only be applied when the law is violated. As the contract utilized BTC instead of fiat currency, the agreed-upon 10% annual interest rate was deemed lawful. It is worth noting that parties in South Korea have the option to challenge legal rulings twice, giving Company B the possibility of appealing the verdict to the Supreme Court.
Source: https://coinpedia.org/news/bitcoin-receives-non-money-status-in-south-korean-court-ruling/