Bitcoin is not considered money and therefore not subject to interest rate regulations according to a South Korean court ruling.

A South Korean court has ruled that Bitcoin (BTC) is not considered as money and interest rate rules do not apply to transactions involving cryptocurrencies.

According to Hanguk Kyungjae, the ruling was made by the Civil Division of Seoul High Court in a case involving two firms that were not named for legal reasons.

The court ruled that it is impossible to set interest rates when lending Bitcoin since cryptocurrency is not money and is not subject to national lending business laws.

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The case involved a contract between two firms signed in October 2020. The first firm, referred to as Company A, is a fintech company that works with cryptoassets. The second firm, Company B, borrowed BTC 30 for three months from Company A and agreed to pay Company A BTC 1.5, which is equivalent to 5% of the total, for the first two months, and BTC 0.75, which is equivalent to 2.5%, for the final month.

However, Company B failed to repay the Bitcoin properly, leading to Company A extending the loan period to April 2021 and changing the interest rate to BTC 0.246 per month, which is equivalent to an annual interest rate of 10%. When Company B failed to repay its creditor according to the terms of the contract, Company A filed a civil lawsuit.

Company B claimed that Company A had violated the Interest Limitation Act and the Loan Business Act by setting new interest rates that exceeded the legal maximum.

However, the lower court refused to accept Company B’s argument, ruling that interest restriction law and loan business laws do not apply to this contract since the object of the contract is cryptoassets, not money.

Company B refuted this and took the case to the High Court for an appeal, but the High Court upheld the original verdict and determined that Company B should deliver the Bitcoin as per the contractual interest rate. The presiding judge stated that the statutory interest rate on debt under commercial law can only be applied when the law is violated.

The judge added that the 10% annual interest rate agreed upon by the two companies could not be seen as a violation of the law since the contract used BTC, not fiat. Under South Korean law, parties can contest legal verdicts twice, meaning Company B can still choose to challenge the verdict at the Supreme Court.

Earlier this month, the trial of a Terraform Labs founder began, with prosecutors alleging that the cryptoasset LUNC is a security. If the prosecution succeeds, legal precedent rules could dictate that other coins are also considered securities.