​Russian pawnshops are interested in accepting cryptocurrencies as collateral

What’s new? Russian pawnshops have become interested in cryptocurrencies and other digital financial assets (DFAs) as collateral. Industry representatives believe that DFAs can be used in the same way as traditional gold, and access to work with virtual currencies will provide an influx of customers from the mining industry. For example, Lombard “SitiKredit” (OOO Neolombard) sent a request to the Central Bank for clarification on the possibility of accepting cryptocurrencies as collateral for loans and has already received a reply, reports Kommersant, which obtained access to the documents.

Kommersant’s material

DFAs, like cryptocurrencies, work on the basis of blockchain technology. However, cryptocurrencies differ from DFAs in that they do not have a centralized management body. In addition, in the case of cryptocurrencies, there are usually no financial obligations to holders on the part of the issuer.

Pawnshop’s position. Marina Brazhnikova, head of Neolombard, explained to the publication that “digital currencies are becoming increasingly popular among the population and, while not yet legally able to be a means of payment, act as an investment tool or a means of savings for both investors and miners, being, in fact, digital gold.” She added that “pawnshops, having gained a foothold in the gold-secured lending segment, are seeking to enter the promising DFA niche.”

Brazhnikova noted that Neolombard’s IT systems are ready to handle digital assets as collateral, adding that the pawnshop receives up to 100 requests for funds secured by cryptocurrencies each month.

Central Bank response. The Bank of Russia recalled that cryptocurrencies are recognized as assets only for the purposes of the laws “On Combating Money Laundering,” “On Insolvency” and “On Counteracting Corruption.” In other cases “the legislation does not establish a legal basis for the turnover of digital currency.” In this, the Central Bank also found no grounds for banning such activities.

Experts at VTB pointed out the necessity of improvement of the legislative base regulating trades with DFAs to achieve the status of full-fledged liquid collateral.

Yuri Fedyukin, managing partner of the law firm Enterprise Legal Solutions, stressed that in the law “On Pawn Shops” the borrower sends the lender the items for safekeeping and the right of the latter to freely dispose of collateral during the term of the contract is limited. Given that it is physically impossible to transfer a DFA to the pawnshop for safekeeping, he admitted that hypothetically it is possible to provide the keys to the wallet, concluding an agreement prohibiting the pledger to perform operations with it. However, the expert admitted that “this is a rather controversial decision.”

reportedthat individuals will be able to make transactions under the bank’s project on DFAs as early as June. Users of the platform will be able to trade assets and exchange them for cash.