Crypto Blamed for Rise in South Korean Youth Loan Defaults

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Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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October 20, 2024 19:30 EDT

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The number of crypto-trading South Korean youths defaulting on loans from neobanks is “skyrocketing,” media outlets reported on October 20.

Media “analysis” claims this is “due to the large number of neobank accounts linked to” crypto exchange wallets.

South Korean Youth Crypto Keenness Comes at a Price?

The claims came in the wake of the release of data showing there has been an increase in loan defaults of in customers aged in their teens and twenties at K Bank.

The data shows that 4.05% of K Bank customers aged under 30 have defaulted on their loans from the bank.

K Bank is famously the partner of the crypto exchange Upbit. The bank has recently seen a huge spike in accounts from younger crypto trading South Koreans.

And that in turn has set the bank on course for an IPO, due to be completed at the end of this month.

Multiple South Korean media outlets, including Digital Daily, claimed that there had been a surge in bank defaults at other neobanks, too.

These also include Kakao Bank, which partnered with the Coinone crypto exchange in August 2022.

The data came from the Financial Supervisory Service after a freedom of information request from the lawmaker Kim Hyun-jung. Kim is a member of the National Assembly’s Political Affairs Committee.

Banks have been left out of pocket to the tune of about $288 million by young borrowers who have failed to repay their debts.

That represents a fiat value increase of approximately 484% compared to data from December 2021, Segye Ilbo reported.

It also represents a 0.3% rise on cases since the end of 2023. The outlets noted that K Bank’s rate was around twice as high as those of its neobank competitors.

Lawmaker Calls for Stricter Loan Screening

Around 2.1% of Kakao Bank customers aged 29 and below have defaulted on their own loans, the data showed.

At Toss Bank, a neobank that does not currently partner with a domestic crypto exchange, the rate was 1.75%.

Financial sector “experts” told media outlets that “twentysomethings with Upbit-linked accounts at K-Bank” may have “borrowed money for cryptocurrency investment” and then “lost the ability to repay their loans.”

Kim claimed that this was proof that neobanks needed to be more discerning with their loan screening protocols.

“Neobanks’ loan accessibility offer some positive aspects. But this can also make it easier for young people to take out loans beyond their means. This can expose them to serious financial risks. We need measures that stop young people from taking out loans they can’t pay back.”

South Korean lawmaker Kim Hyun-jung