Crypto loans are an increasingly common phenomenon in the crypto world. Various blockchain projects, such as Aave, Kava, MakerDAO and others promote peer-to-peer-loans.
There are multiple legal issues linked to crypto loans. Many of these start with the question whether loans in crypto assets are loans-in-kind or money loans. In a recent contribution to Neue Juristische Wochenzeitung (NJW) – one of Germany´s most reknown law reviews – a judge of the Munich District Court took the position that crypto loans have to be treated as money loans and therefore, if offered by an entrepreneur, have to be in compliance with EU consumer protrection laws (NJW 2021, 3751).
Other commentators advocate a loan-in-kind which is – from a legal perspective – not logically mandatory, as digital assets are not „things“ unless determined as such by law (cf. Sec. 2 para 3 of the German Eletronic Securities Act – eWpG – which says that electronic securities are things within the meaning of the law). Eventually, the crypto loan could also be a rental agreement on rights (depending on the terms and conditions).
Following the money loan track, the next question might be under which circumstances a „peer“ qualifies as an entrepreneur. The commercial character of an activity is a frequently addressed regulatory issue as financial regulation is meant to regulate commercial suppliers but not the private sector (cf. Sec. 32 German Banking Act, Sec. 10 Payment Services Act). In the non-digital world, the German Federal Supervisory Authority (BaFin) assumes a commercial character if more than 500.000 EUR are given to at least 21 borrowers (or more than 100 loans are handed out, no matter of the amount). These limits are irrelevant, if the commercial character can be deducted from other circumstances, in particular the duration of the activity and the profit interest.
It is hard to predict, how the regulator´s view on a defi lending platform that was created to generate income for the peers, might look like. The focus of regulation would for sure be on the platform. The platform is likely to qualify as an Alternative Investment Fund under German Investment Law (KAGB), but not as a (CRR-) credit institute under the German Banking Act (KWG) as crypto assets, even stable coins, are regulated as units of account and not as money or e-money. However, if the platform is only a software code with a decentralized organization, there might be a need to address official instructions to the peers, if no one in charge is left over.
