Nikolas Sargeant
South Korea is witnessing a concerning trend as the number of young crypto traders defaulting on loans from neobanks has reportedly "skyrocketed," according to media reports on October 20. This surge in defaults is being attributed to the high number of neobank accounts linked to cryptocurrency exchange wallets.
Young South Koreans Pay the Price for Crypto Enthusiasm
Recent data reveals a significant increase in loan defaults among customers aged under 30 at K Bank, a major neobank partnered with the crypto exchange Upbit. The default rate for K Bank customers under 30 has reached 4.05%, nearly double that of its neobank competitors.
This trend extends beyond K Bank, with other neobanks like Kakao Bank, which partnered with Coinone exchange in August 2022, also experiencing rising default rates among young borrowers.
The Financial Supervisory Service released these figures following a freedom of information request by lawmaker Kim Hyun-jung, a member of the National Assembly's Political Affairs Committee.
The total amount of defaulted loans by young borrowers has reached approximately $288 million, marking a staggering 484% increase compared to December 2021 figures. This represents a 0.3% rise in cases since the end of 2023.
Calls for Stricter Loan Screening Processes
Financial experts suggest that young adults with Upbit-linked accounts at K-Bank may have borrowed money for cryptocurrency investments and subsequently lost their ability to repay these loans.
Lawmaker Kim emphasized the need for more stringent loan screening protocols at neobanks. She stated, "Neobanks' loan accessibility offers some positive aspects. However, this can also make it easier for young people to take out loans beyond their means, exposing them to serious financial risks. We need measures that prevent young people from taking out loans they can't repay."
As South Korea grapples with this emerging financial challenge, the intersection of cryptocurrency enthusiasm and easy access to loans through neobanks is prompting calls for regulatory action to protect young investors and maintain financial stability.
