A court in South Korea has ruled that a legal limit on interest rates does not apply to Bitcoin or other cryptocurrencies because they are not considered “currency”, reported Wednesday. local media.
The Seoul Central District Court last month ruled in favor of Bitcoin management company A in a lawsuit, where A filed a civil suit against company B claiming Bitcoin that B owes, according to Maeil Business News. The actual names of the companies involved in the case have not been revealed.
In October 2020, Complainant Company and Company B signed an agreement where A loaned B 30 Bitcoins (currently worth $604,320) to be returned in six months with monthly interest payments.
Company A filed a lawsuit after the indebted company failed to return the borrowed cryptocurrencies after the agreed settlement date. The companies had agreed on a monthly interest of 5%, which turns into an annual interest rate of 60%.
However, B claimed that A had violated the two laws, the Interest Limitation Act and the Credit Business Registration and Financial Services User Protection Act, which restrict all interest on loans to a 24% annual rate.
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In the ruling, the judiciary ruled that current laws do not apply to the deal between the companies.
“[The two acts] limit the highest interest rate on lending money, but in this case the object of the agreement is Bitcoin, not money,” he said, according to Maeil Business.
The court ordered Company B to return the Bitcoin or the converted amount of money based on the market price of Bitcoin at the end of the hearing. The court did not explicitly mention the amount of interest owed by Company B, according to media reports.
The court’s decision follows a growing movement among South Korean authorities to classify and regulate cryptocurrencies.
In the ongoing investigation into the collapse of South Korea-born crypto project Terra-LUNA, local prosecutors last month issued an arrest warrant for Terra founder and CEO Do Kwon on the grounds that Luna cryptocurrency is an investment security.
See related article: South Korea Financial Regulator: Crypto May Be Subject to Capital Markets Law
This claim, which is one of the first occasions a local authority has labeled crypto a security, makes Kwon and his company, Terraform Labs, in violation of capital markets law, an unregistered contract service. financial.
Following the arrest warrant, Lee Bok-hyun, Governor of South Korea’s Financial Surveillance Service (FSS), told a press conference that certain cryptocurrencies can be considered securities.
Meanwhile, the country is preparing a new regulatory framework for cryptocurrency named “Digital Asset Basic Act”, which aims to define and institutionalize cryptocurrencies into two categories: security tokens and insecure tokens.