A practice in the crypto-assets market has developed: "lending" in crypto-assets. It is the operation by which a crypto-asset exchange or intermediation platform lends to a given beneficiary an amount of crypto-currency for a given period of time, with the obligation to return the number lent at maturity. The purpose of such a contract is to provide greater leverage for traders in crypto-assets than without this technique. This use of crypto-assets is a lending operation (I.), highlighting the risks associated with its practice in the absence of regulation (II.).
I. A CRYPTO-ASSETS LENDING OPERATION
While it is easy to describe the operation whereby one person consents to another to transmit something to him, on condition that it is returned to him at a given time, as a lending operation, the use of crypto-asset as a unit is a source of difficulty (A.). These are the coordination of the difficult identification of the characteristics of a crypto-asset and the obsolescence of the articles of the Civil Code relating to lending. However, these difficulties are surmountable since there is another factor of distinction, that of the interest loan (B.).
A. QUALIFICATION DIFFICULTIES
The Civil Code distinguishes between the two forms of loan: "that of things that can be used without destroying them"[1], the loan for use, and "that of things that are consumed by the use that is made of them"[2], the consumer loan. Thus, the nature of the thing lent becomes essential again: are crypto-assets consumable goods?
A consumer loan - If we look at this particular object from a monetary point of view, we will consider that crypto-assets are consumable, the borrower having to return the nominal amount lent, although the money used was not actually consumed, since it was only transmitted without it perishing in the transaction. The consumer loan would then be possible, since it relates to a quantity of thing consumable by use[3]. However, since consumer loans are essentially aimed at lending a sum of money[4], their qualification is subject to the monetary recognition of the crypto-asset unit, which does not seem to be possible and envisaged. Moreover, the individualised nature of each unit probably makes the provision reclassifying as loans for use consumer loans giving "things which, although of the same kind, are different"[5] applicable.
A loan for use - Conversely, if viewed through the prism of the technology used, since each crypto-asset unit is tamper-proof and individualized, they would not be consumable. Since the loan for use can only relate to a thing that is not consumed through use[6], it would have to be qualified as such. However, the individualized nature of each unit together with the obligation to return it, which is the very essence of loan for use[7], will require the same units lent to be returned, a hypothesis which does not exist in practice, since only the return of the number of units, but not necessarily those actually transmitted, is required.
The inappropriateness of a qualification linked to the nature of the crypto-asset - The distinction between consumer loan and loan for use, which has remained intact since 1804, is no longer necessarily relevant: loan for use was considered free of charge[8], whereas loan for use was considered remunerated[9]. Thus, the perishable nature of the thing lent is not such as to make it possible to decide on the type of loan contract that constitutes "lending". It is in fact impossible to settle the question, as the solution is more a matter for debate between the pro-crypto-asset and the crypto-sceptic. Moreover, the diversity of crypto-assets and their characteristics does not seem to allow a general solution to be found on this point, since some (ETH) units are consumable while others are not (BTC). Since the practice of "lending" is necessarily remunerated by interest, while the question of the consumability of crypto-assets deserves clarification, it is not essential in the legal analysis of the transaction.
Like any loan in cash, the crypto-asset loan is a consumer loan, or at least a form of interest loan. In fact, alongside the classic forms of loan, there is the interest loan that best suits crypto-asset loans since it is always the case, regardless of the consumable nature of the units.
B. A FORM OF INTEREST-BEARING LOAN
While the very nature of a "lending" contract on a crypto-asset lending platform is difficult to define legally since the two civil law forms suffer from incompatibilities, it emerges that the analysis of the onerous nature of almost all crypto-asset loans makes it relevant to classify them as a new form of interest-bearing loan.
An interest-bearing loan - An interest-bearing loan is one in which the lender stipulates, in addition to the obligation of restitution inherent in any loan, that the loan will earn interest during the performance of the contract. This option is open to loans involving "a sum of money, commodities or any other movable thing"[10]. This stipulation must be express[11], and mention the applicable rate, otherwise the legal rate will apply[12]. Nevertheless, in the absence of a stipulation, the borrower who pays non-tipulated interest may "neither repeat it nor charge it against the capital[13]" if the capital is voluntary[14] and the interest is legal[15]. It appears from practice that the loan in crypto-asset is offered either by exchange platforms[16] granting a loan in crypto-asset to the users of their services, most often in the short term, or by platforms[17] bringing together individuals wishing to finance a company's project, a form of participative and crypto-asset financing that is more long-term. In any event, both practices are remunerated by interest, which makes applicable the obligations to which credit institutions are subject when they grant loans for valuable consideration and which are customary.
II. AN ILLUSTRATION OF HIGH-RISK PRACTICE
Announcement - Lending in crypto-asset seems to be a particularly risky use of technology. As the value of one of these units is already a risky holding compared to the purchase value, the remuneration of a loan in this unit for a more or less long period of time seems to be subject to considerable uncertainty. Faced with this multitude of risks (A.), this practice requires the application of financial regulations (B.).
A. A DIVERSITY OF RISKS
Fraud risk - The holding of crypto-asset units represents a financial risk, as they are not necessarily backed by actual activity or an underlying asset. However, the risk of fraud is increasing with respect to the use of these services by novices. The convertibility of crypto-assets into different legal tender currencies, which is necessary to make profits from speculation, is not guaranteed by any centralised body. Moreover, since security is not guaranteed by any real institution, the danger of taking control of the network operating the "blockchain" remains possible[18].
Legal Risks - In addition to these risks of fraud, in the event that the transaction is real but litigation arises, both the lender and the borrower are exposed to significant legal risk. This is because the legality of the transaction is not assured and there is a significant risk that a dispute cannot be settled judicially. If, despite the existence of the monetary monopoly, it is possible to lend money in a currency other than the national currency in France, this possibility is limited to the initial remittance[19]. It is lawful to lend, in France, Swiss francs, so there should be nothing to prevent the lending of private, and therefore crypto-asset, currencies. Thus, when 10 units of crypto-actif are loaned with an obligation to return them at maturity, the obligation to return them can be validly enforced in their equivalent value in euro. In practice, however, lending in cryptomoney is mainly used for trading purposes[20]. The units lent are repaid in the same unit. This type of operation is therefore normally prohibited under French law because, while it is possible to lend in any currency, repayment must be made in euro[21]. Some "wallets" are also remunerated since they are placed and used for the loan, showing the financial use of this type of instrument.
B. TOWARDS PROTECTION OF THE REAL ECONOMY
The regulation of crypto-currency derivatives - For the AMF, crypto-currency derivatives are financial instruments[22]. A crypto-currency, which "does not fall into the category of financial securities or financial contracts, is not a financial instrument within the meaning of Article L211-1 of the Monetary and Financial Code"[23]. However, "the qualification of the derivative is independent of that of its underlying, which can be analysed as a simple technical support for the derivative, a simple index reference"[24]. The classification of contracts on crypto-assets as derivatives is subject to the relevant public policy regulations, in particular the obligation for platforms to be authorised to provide investment services and to comply with the rules of good conduct[25]. The contracts themselves are subject to the obligations arising from the EMIR Regulation of 4 July 2012 on clearing and reporting to central securities depositories[26], while the riskiest of them should be subject to an additional measure[27], a ban on advertising[28]. The concept of financial instruments, whose plasticity is sometimes criticized, allows the AMF to adapt and extend its framework, "rightly so in the case of derivatives on crypto-currency"[29].
Strict application of financial regulations - "exchange" platforms, i.e., exchange between crypto-assets, and lending in crypto-assets are the most speculative uses of these units. Like crypto-asset derivatives in the financial instruments category, crypto-asset loans, whether for leverage or financing between individuals, should also be subject to the strictest financial regulations, given the risks incurred by the uninformed user.
The prohibition of subscription to certain operators - The Banque de France suggests regulating investments in crypto-assets by supplementing their regulation with a ban on "certain regulated companies (banks, insurance companies, management companies, etc.) from intervening in these crypto-assets"[30], particularly with regard to "deposit and loan activities in crypto-assets". In the case of investments, a deduction is made from the amount of equity investments, which would require changes in accounting standards, or at least a clear position from international accounting institutions. With regard to individuals, marketing by professionals should be prohibited to uninformed individuals and, when offered, to informed investors, accompanied by "customer protection rules"[31].
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[1] Art. 1874, C. civ.
[2] Art. 1874, C civ.
[3] Art. 1892, C. civ.
[4] Art. 1895, C. civ. : on the obligation to return the nominal value.
[5] Art. 1894, C. civ.
[6] Art. 1878, C. civ.
[7] Civ. 1ère, 12 nov. 1988, n°96-19.549, Bull. n°312, p. 216. ; Civ. 1ère, 3 févr. 2004, n°01-00.004, Bull. n°34, p. 28.
[8] Art. 1876, C. civ.
[9] F. Grua et N. Cayrol, « Art. 1874 : Fasc. Unique : Prêt – Distinction entre le prêt à usage et le prêt de consommation », JurisClasseur Civil Code (Maj, 13 mai 2017).
[10] Art. 1906, C. civ.
[11] Civ. 1ère, 23 juill. 1974, n°73-10.013, Bull. Civ. I n°243, p. 208.
[12] Civ. 1ère, 26 nov. 1991, n° 90-17.169, Bull. civ. I, n°335, p. 218.
[13] Art. 1906, C. civ.
[14] Com., 23 oct. 1990, n°88-19.244, Bull. n°249, p. 173, Recueil Dalloz 1991, 73., note Gavalda.
[15] Com., 18 juin 1996 n°94-20.413, Bull. Civ. IV, n°183, p.158.
[17] [https://www.bitbond.com/fr].
[18] J. Lasserre Capdeville, « Monnaie : 3 Questions : Le bitcoin », La Semaine Juridique Entreprise et Affaires n° 3, 16 janv. 2014, 25, par. 3.
[19] A. Bénabent, « Droit civil, Les contrats spéciaux civils et commerciaux », éd. Montchrestien, 4ème éd., 1999, par. 835.
[20] One of the largest crypto-asset exchange platform is Poloniex.
[21] M. Laine, « La monnaie privée », éd. Dalloz, Revue Trimestrielle de Droit Com. 2004, p. 227, par. 22.
[22] AMF, « Analyse sur la qualification juridique des produits dérivés sur crypto-monnaies », 22 févr. 2018, p. 1-2.
[23] M. Rousille, « Le bitcoin : objet juridique non identifié », éd. Banque & Droit nº 159 janv./févr. 2015, pp. 27-31 ; P. Pailler, « Quelles règles pour l'encadrement de la monnaie virtuelle en France », Revue Internationale des Services Financiers, 2014/4, p. 42.
[24] Com., 16 janv. 1990, n° 88-10.160 : Bull. civ. IV n° 13, p. 8.
[25] P. Pailler, « Les dérivés sur crypto-monnaie sont des contrats financiers », Revue de Droit bancaire et financier n° 2, mars 2018, alerte 23, par. 4.
[26] Règl. UE n° 648/2012, 4 juill. 2012, sur les produits dérivés négociés de gré à gré, les contreparties centrales et les référentiels centraux, JOUE L201/1, 27 juill. 2012.
[27] P. Pailler, « Les dérivés sur crypto-monnaie sont des contrats financiers », Revue de Droit bancaire et financier n° 2, mars 2018, alerte 23, par. 5.
[28] Art. L533-12-7, C. mon. fin.
[29] P. Pailler, « Les dérivés sur crypto-monnaie sont des contrats financiers », Revue de Droit bancaire et financier n° 2, mars 2018, alerte 23, par. 6.
[30] Banque de France, « L’émergence du bitcoin et autres crypto-actifs : enjeux, risques et perspective », Focus n°16, 5 mars 2018, p. 5.
[31] Banque de France, « L’émergence du bitcoin et autres crypto-actifs : enjeux, risques et perspective », Focus n°16, 5 mars 2018, p. 5.