Russian Bank Issues First "Precedent-Setting" Crypto-Backed Loan

Amid the recent euphoria over DeFi (or decentralized finance) in crypto space which leverages decentralized networks to transform old financial products into trustless and transparent protocols, which among other things provide loans to businesses or the public with no intermediaries are present, a Russian bank has become the first lender in the country to issue a loan secured by cryptocurrency tokens, Russia’s Kommersant reported.

Lender Expobank said it issued an individual loan to businessman Mikhail Uspensky earlier this week, with Uspensky putting up Waves crypto tokens as collateral for the agreement, The Moscow Times noted. The size of the loan was not disclosed.

Kommersant said the bank consulted a number of lawyers and crypto experts on the deal beforehand, resulting in the Waves tokens being defined as “other property” and placed in an escrow account for the purposes of securing the loan.

Tanzila Yandieva, head of Expobank’s legal department said the deal was “precedent-setting for both the banking and legal communities.”

Russia passed its first law on cryptocurrency earlier this summer. The digital currency industry saw its provisions as overly restrictive, as the rules will ban Russians from using cryptocurrencies as a form of payment when they come into force next year. Businesses will also be barred from advertising crypto payment options.

Expobank believes the use of the crypto tokens as collateral for a loan, defined as “property”, would be allowed under the new guidelines.

The loan comes at a challenging time for cryptocurrency fans in Russia, which passed its first law on cryptocurrency earlier this summer. The digital currency industry saw its provisions as overly restrictive, as the rules will ban Russians from using cryptocurrencies as a form of payment when they come into force next year. Businesses will also be barred from advertising crypto payment options.

Despite the new law, Expobank believes the use of the crypto tokens as collateral for a loan, defined as “property”, would be allowed under the new guidelines.

Meanwhile, in the US, DeFi tokens like ChainLink, YAM, NXM, Datamine and Yearn.Finance...

... have exploded in recent week as the promise of decentralized finance in crypto has sparked a new flood of investors in the space.