Legal implications of crypto-backed mortgages and pledges: a private international law perspective

• Pages: 653-668
• Author: Silvana Canales Gutiérrez

LEGAL IMPLICATIONS OF CRYPTO-BACKED

MORTGAGES AND PLEDGES:

A PRIVATE INTERNATIONAL LAW

PERSPECTIVE

Silvana canales Gutiérrez*

Universitat Rovira i Virgili

SUMMARY: I. INTRODUCTION.— II. THE POSITION OF THE EUROPEAN

UNION ON USING CRYPTOCURRENCIES AND CRYPTO-ASSETS.— III. THE

INTERNATIONAL ELEMENT IN MILO’S CRYPTO-BACKED MORTGAGES.—

IV. SOME PARTICULARITIES OF THE MORTGAGES IN THE U.S. COMPA-

RED TO THE EU.— V. MORTGAGES ON BITCOIN: PRACTICAL APPROACH

ON INTERNATIONAL JUDICIAL COMPETENCE.— VI. THE PLEDGE ON

CRYPTOCURRENCIES: 1. The French intangible pledge; 2. Delaware’s intangible

pledge.— VII. THE PURCHASE POSSIBILITY.— VIII. CONCLUSIONS.

I. INTRODUCTION

The global nancial crisis of 2007, generated mainly by the default

of subprime mortgages in the United States, had a negative impact

on international banks and therefore on the global market. The crisis

has forced governments, especially those of the Member States and

the authorities of the European Union, to prioritize the importance of

* Postdoctoral researcher and Private International Law Professor at the Rovira i Virgili

University (URV) (silvana.canales@urv.cat). This study has been conducted in the framework

of the research Project “Property rights system over tangible goods in the eld of European

Private International Law: aspects of international jurisdiction and applicable law” funded by

the Spanish Ministry of Science and Innovation (Ref. PID2020-112609GB-I00). All the websites

mentioned in this study were visited on 1 April 2024.

PRIVATE INTERNATIONAL LAW ON RIGHTS IN REM IN THE EUROPEAN UNION

DERECHO INTERNACIONAL PRIVADO SOBRE DERECHOS REALES EN LA UNIÓN EUROPEA

Maria Font-Mas (dir.)

ISBN: 978-84-1381-849-8

Madrid, 2024

pp. 653-667

DOI: 10.37417/PILRIRUE/29

Marcial Pons Ediciones Jurídicas y Sociales

Editado bajo licencia Creative Commons Attribution 4.0 International License

654 SILVANA CANALES GUTIÉRREZ

home ownership 1. This was exacerbated from 2020 2 onwards by the

COVID-19 pandemic, making housing the main refuge and the center

of life, work and leisure for individuals and families worldwide 3.

In the European Union, although the COVID-19 pandemic wreaked

havoc on the economy and maximized the difculties in acces sing

housing, it is not possible to ignore the existence of a legal and

non-economic constraint to its access, Directive 2014/17/EU 4, which

recognizes in its recital (3) the following:

The nancial crisis has shown that irresponsible behavior by market

participants can undermine the foundations of the nancial system, lea-

ding to a lack of condence among all parties, in particular consumers,

and potentially severe social and economic consequences.

To counteract the consequences of the economic crisis, Directive

2014/17/EU established a common framework for Member States. It

determined that consumer credit agreements secured by a mortgage

guarantee on a residential property could be granted, provided that a

creditworthiness assessment guaranteeing the repayment of the credit

is carried out and approved in each case.

Although the Directive dates back to 2014, the deadline for its

transposition was extended to 2019, with the result that, when the

pandemic arrived, the Member States had transposed the measures

established by the Directive and had tightened the requirements for

intermediary credit institutions to grant mortgage loans.

Once the regulatory requirements of the directive have been imple-

mented and some of its effects have been studied, it has been criticized

1 P. kenna, H. siMón-Moreno, «Towards a common standard of protection of the right

to housing in Europe through the charter of fundamental rights», European Law Journal, vol.,

25, 2019, p. 621.

2 The temporal leap on this paper from 2007 to 2020 is justied by the economic crises

of the last two decades. This does not imply that other economic crises could not have occurred

between these periods; rather, both are somehow linked to the housing sector. The rst crisis

stemmed from subprime mortgages, while the second was inuenced by the signicance of hou-

sing as a refuge and protection during the COVID-19 pandemic. It is also important to remark

that the economic crisis of 2007 had not been completely overcome by 2020. Therefore, both

dates cannot be studied in isolation, especially considering that the mortgage restrictions in place

in 2020 and continuing to the present day were implemented as a preventive measure to avoid

the recurrence of events similar to those that triggered the initial crisis, as will be explained later.

See H.E., jackson, S.L. schwarcz, «Protecting Financial Stability: Lessons from the COVID-19

Pandemic», Harvard Business Law Review, vol. 37, 2021, pp. 197-198.

3 S. nasarre aznar, «Never rains but it pours: the problem of access to housing in a

pandemic context», Derecho Privado y Constitución, vol. 37, 2020, p. 275.

4 Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014

on credit agreements for consumers relating to residential immovable property and amending

Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010, published on the

Ofcial Journal of the European Union num. 60, February 28, 2014.