Is This the Real Life? Is This Just Fantasy? Obstacles to the Use of Digital Assets as Collateral for Cross-Border Transactions

Bankruptcy and commercial litigation attorney Olivia Scott wrote an article for the American Bankruptcy Institute (ABI) Journal about the use of digital assets in cross-border transactions and the challenges they present for borrowers and lenders. Recently, J.P. Morgan Chase announced it would allow clients to use certain cryptocurrency-linked assets as collateral for loans; this move and related ones are emblematic of a push in the U.S. to incorporate virtual assets in domestic transactions through establishing a uniform regulatory framework. The international stage, however, lacks such cohesion, leaving parties to a transaction on their own to determine how they should approach utilizing these assets in cross-border, secured transactions. In her article, Ms. Scott explains how the borderless nature of digital assets provides benefits for borrowers by opening the door for global financing options that would remain shut with tangible assets. She then describes different regulatory proposals around the globe, including the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Secured Transactions, International Institute for the Unification of Private Law (UNIDROIT) Principles on Digital Assets and Private Law and Article 12 of the Uniform Commercial Code (UCC). The article concludes by laying out questions lenders should keep at the forefront when taking an interest in digital assets to mitigate the risks that come with a lack of standards.

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