French judges apply securities lending principles to bitcoin lending
The Commercial Court of Nanterre released a decision of 26 February 2020 confirming that bitcoins are fungible intangible assets.
Today, the Commercial Court of Nanterre released a decision of 26 February 2020* confirming that bitcoins are fungible intangible assets and, consequently, bitcoin lending only requires the borrower to repay bitcoins of the same type, quality and quantity to the lender (absent specific provisions to the contrary in the loan agreement).
As a result, any gains or advantages accruing to the borrower during the lifetime of the loan can be retained by the borrower. In the instant case, the French judges confirmed that because the hard fork leading to the creation of Bitcoin Cash (BCH) occurred during the period of the loan, the borrower is able to keep the BCHs received in respect of the loaned bitcoins.
This decision is unsurprising in light of the French law applicable to securities lending, which has led to the market of practice of including specific provisions in securities lending agreements to require borrowers to return at maturity any gains or advantages received during the period of the loan along with the loaned securities.
This decision appears to be applicable to any other fungible cryptocurrency or token. By contrast, gains or advantages received during the loan of non-fungible tokens (NFTs), of which the lender remains the owner, would have to be returned to the lender (absent specific provisions to the contrary in the loan agreement).
Crypto-trading professionals should keep this decision in mind when lending cryptocurrencies or tokens to clients located in France and adapt their loan agreements accordingly.
- Paymium vs BitSpread, Tribunal de Commerce de Nanterre, 26 février 2020.
