Pledging Digital Assets as Collateral

Extract

[...] In this sense, crypto-assets can be used to speculate on financial markets. They present similar characteristics to stocks, bonds, and derivatives.27. On this subject, the Commission Bancaire, Financière et des Assurances (CBFA) has published guidelines aimed at clarifying the position of Belgian authorities. According to these guidelines, crypto-assets can be considered as financial instruments if they meet certain conditions, such as negotiability on a financial market or their nature of investment. Furthermore, crypto-assets can be considered as representing right to receive future goods or services, may be considered as a prepayment for these goods and services, and could therefore be treated as relevant to standards'28, B. [...]

[...] But in the context of using digital assets as collateral, it may prove unavoidable for the security of the transaction. But for this, the method of conservation must be done on a physical medium such as a USB key. This method facilitates the dispossession of the pledged asset and also facilitates the seizure of the asset in the event of default by the debtor at maturity. b. The Pledging of Digital Assets The possibility of pledging digital assets comes from the fact that they are qualified as "intangible movable goods », although its validity and opposability are not certain34. [...]

[...] To mitigate these risks, decentralized finance protocols implement security mechanisms such as liquidation buffers, volatility limits, and robust oracle mechanisms to provide reliable price data. Regular auditing of smart contracts and community engagement are also essential to strengthen trust in the collateral liquidation process for crypto-assets. [...]

[...] First, it allows the fiduciary to preserve the ownership of the asset, while transferring the use and benefits to the fiduciary. Secondly, the fiducie créance can be constituted without requiring an authentic act, thus offering greater flexibility in its implementation. In addition, the fiducie créance can be constituted to guarantee a future or conditional claim, thus offering increased protection to the creditor22. The establishment of a fiducie créance requires the conclusion of a contract between the fiduciant (the one who transfers the asset as collateral) and the fiduciary. [...]

[...] In Belgium, as in many other countries, the legal nature of crypto-assets raises complex questions. To this end, it is advisable to understand the applicable legal framework for crypto-assets in order to ensure compliance with the current legislation. Thus, several aspects must be taken into account to understand the legal treatment of crypto-assets in Belgium. A. The legal qualification: The legal qualification of crypto-assets in Belgian law is mainly influenced by European legislation, and particularly the Markets in Financial Instruments Directive (MiFID)24 and the Payment Services Directive (PSD2). [...]