We have already talked about virtual assets and their role in securing an obligation. Today, let's dwell in more detail on the concept of "control" in guaranteeing proper contractual discipline with such assets.
Ownership, use and disposal of a virtual asset is recorded in the system for ensuring the turnover of virtual assets. However, in today's world, no registry is immune from hacker attacks, and therefore the creditor's direct or indirect (creditor's authorized person) control over the secured virtual asset is an additional guarantee of the proper execution of the transaction by the parties.
According to modern legal trends, "control" refers to cases where the creditor:
- due to the specifics of the secured virtual asset, the establishment of digital protocols or system requirements, is the exclusive beneficiary from foreclosure on the security object, or consents to the existence of other such beneficiaries;
- is granted the exclusive right to change control - to grant other persons the opportunity to be the exclusive beneficiary from the foreclosure on the security object or to give consent to the existence of other such beneficiaries;
- gets the opportunity to identify himself as the exclusive beneficiary of the foreclosure on the security object or the person who can carry out a change of control.
The transfer of ownership rights to a secured virtual asset can be achieved by physically handing over to the creditor an electronic access key to it (flash or other data carrier) with subsequent changes to the existing registers of the owners of such an asset with or without subsequent registration, or changes to the access protocols in the system , where the specified asset is stored. A change of control consists in the fundamental replacement, modification, destruction, cancellation or removal of a virtual asset, with the subsequent derivative creation of a new digital asset subject to control by the creditor.
One way or another, all of the above is subject to detailed regulation mediated by the contract. And Dynasty Law & Investment professionals will help develop the latter.
Oleksiy Hrachov, attorney at Dynasty Law & Investment