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A path back to growth for community banks: credit risk transfer trades
Many community and regional banks in the US are under intense pressure from economic forces that are outside of their control. These locally oriented banks are increasingly turning to credit risk transfer (CRT) trades as a way to reopen the lending pipeline. CRTs keep existing loans on a bank’s balance sheet, while de-risking the portfolio and providing substantial capital relief to fund new lending. Further, by shifting risk to non-bank investors, CRTs provide a new channel for private equity and others to deploy the funds that they have accumulated over the last several years.
19 March 2024A MiCAR for the UK? Or something else altogether?
This article compares key aspects of the EU’s draft regulation on Markets in Cryptoassets (MiCAR) and the UK’s approach outlined in HM Treasury’s recent consultation, drawing out key similarities and differences and their implications.
19 March 2024Cryptocurrency and the claim in debt
This article considers, briefly, whether a claim for payment in cryptocurrency can (arguably) be brought as a claim in debt. It also considers the implications of such a characterisation in two specific areas of insolvency law – petitions for bankruptcy, and whether a proof of debt based on a cryptocurrency payment obligation can benefit from the Insolvency (England and Wales) Rules 2016 (IR 2016) r 14.21, which values the claim in sterling by reference to the exchange rate at the commencement of insolvency. These issues are likely to interest lenders under crypto-loans (which we shall call “crypto-lenders”), insolvency practitioners, and others in the crypto space.
19 March 2024What’s at stake? The legal treatment of staking
Since 15 September 2022, the majority in number and value of blockchain systems are secured by proof-of-stake consensus mechanisms. Yet the legal treatment of staking has received little attention. Further confusion is caused by the fact that the use of the word “staking” has generally focussed on the existence of a return, rather than consideration of how that return is generated. For this reason, the term “staking” is now used to refer to a range of materially different activities, from staking for the purposes of validating a blockchain protocol (the primary focus of this article) to staking referring to DeFi lending and staking as used as a rewards system in NFT markets or online games. This article considers the features of different staking arrangements, describes some of the potential legal consequences of those arrangements and identifies issues that might arise as proof-of-stake consensus mechanisms evolve. The article suggests that validator staking within proof-of-stake systems is a very different type of arrangement, with a very different risk profile, to the provision of other staking models, even if colloquially or economically they are seen as “equivalent”, as both arrangements generate a return and involve locking up tokens.
19 March 2024Service, lies and NFTs: litigation and the blockchain
Since the advent of the blockchain, the courts have grappled with difficult concepts such as how to classify cryptocurrency or non-fungible tokens (NFTs) in claims involving fraud or the enforcement of property rights. In this article we will look at some of the recent developments in caselaw in England and Wales with a practical focus on the tools currently available to litigators when dealing with these concepts and in particular: (i) the use of the blockchain in serving proceedings; (ii) important considerations for instructing experts in claims involving cryptoassets; and (iii) the particular importance of Bankers Trust and Norwich Pharmacal orders.
19 March 2024Principal and main purpose tests in tax treaties: a UK tribunal approach
The recent decision in Burlington Loan Management DAC v HMRC shows the difficulty in determining when parties have a main purpose of obtaining the benefit of a double tax treaty and indeed, which parties’ purposes are relevant. Despite the fact that this case was determined on the basis of UK tax case law, it is likely that an international fiscal meaning of “principal purpose” will develop over time. The UK tribunal decision shows the complexity of assessing whose purposes are relevant and what, on the basis of the evidence, those purposes actually were. This raises important considerations for taxpayers determining whether treaty benefits are available.
19 March 2024Remedies for victims of crypto fraud
In this article, Gretel Scott discusses the possible remedies and methods of enforcement for victims of crypto fraud.
19 March 2024Appropriation of financial collateral under English law security financial collateral arrangements
For nearly 20 years English law has permitted mortgagees and chargees of financial collateral to exercise a self-help remedy of appropriating charged collateral as a means of enforcing their security. The requirements include agreeing on the valuation of the collateral and conducting the valuation in a commercially reasonable manner. Since the implementing legislation is far wider than required by European law, the effectiveness of the remedy can be undermined by disputes as to what is commercially reasonable in particular factual contexts.
19 March 2024TARGET 2 – TARGET 2 Securities Consolidation: major change to payment standards
Readers may have seen reference in the media to the European Central Bank (ECB’s) T2-T2S Consolidation project from which it may have appeared to be simply a merging of two existing systems on the same technical platform currently being used by TARGET 2 Securities (T2S). However, it is far more wide-ranging and complex than may first appear and this article aims to put it in context of other developments both within and outside the euro area. This article is based on the latest information available at the time of writing but some of the content may be slightly out of date by the time it is published. However, after completion of drafting a senior ECB official stated that the possibility of a further delay beyond 20 March is considered to be extremely low.
19 March 2024Valuing swaps: what exactly are “hidden costs” and “mark-to-market”?
Calculating the value of an interest rate swap, or any financial security, has always been extremely important not just for market participants, but also in litigation. Several aspects of the analysis – such as mark-to-market (MTM) and hidden costs – have been highlighted in cases. This article explains the valuation method and its importance to litigation.
19 March 2024
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