A South Korean court declared on Wednesday that a legislative cap on interest rates does not apply to Bitcoin or other cryptocurrencies because they are not considered “money.”
According to Maeil Business News, the Seoul Central District Court found last month in favor of Bitcoin management business A in a trial in which A filed a civil complaint against firm B seeking Bitcoin that B owes. The identities of the firms engaged in the lawsuit were not made public.
The plaintiff company and firm B entered an agreement in October 2020 under which A lent B 30 Bitcoins (now valued at $604,320) to be reimbursed in six months with monthly interest payments.
Firm A initiated the action after the debtor failed to repay the loaned cryptocurrency by the agreed-upon settlement date. The companies agreed on a monthly interest rate of 5%, which equates to a 60% annual interest rate.
B, on the other hand, argued that A breached two statutes, the Interest Limitation Act and the Act on Registration of Credit Business and Protection of Finance Users, which limit all loan interest to a maximum annual rate of 24%.
The judiciary determined in the judgment that existing regulations do not apply in the agreement between the corporations.
“The two acts limit the highest rate of interest on money loans, but in this case the subject of the agreement is Bitcoin, not money,” it said.
The court ordered firm B to either refund the Bitcoin or the amount of money converted at the end of the hearing depending on the Bitcoin market price. According to media sources, the court did not expressly state the amount of interest owed by firm B.
The court judgment comes amid a growing push by South Korean authorities to identify and regulate cryptocurrencies.
Local prosecutors filed an arrest order last month on Terra founder and chief Do Kwon in the ongoing investigation into the collapse of the South Korean-born Terra-LUNA crypto project, citing the Luna coin as investment security.
This is one of the first times a municipal body has designated cryptocurrency as a security, putting Kwon and his firm, Terraform Labs, in breach of capital markets legislation as an unregistered provider of financial contracts.
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