After DFA in yuan, Russian operators return to euro

Platforms for issuing digital financial assets (DFAs) are once again returning to issuing such instruments in currency. Currently, the placement of DFAs in euros is taking place on the Alfa Bank site. A year ago, Lighthouse placed the first issue of DFA in yuan and next year it is going to repeat this experience. Market participants believe that currency DFAs can be used for cross-border settlements. However, they are not without technological risks and risks of regulatory changes.

Information system operators (ISOs) have again turned to foreign currency-denominated DFAs. Alfa Bank is currently placing an issue with a maximum volume of €3.5 million with a yield of 12% per annum. The issuer of the two-year DFA is the multivendor service company Wone IT. This is only the second DFA issue denominated in foreign currency. The first issue, in yuan, was posted on the Lighthouse site a year ago (see “Kommersant” dated December 2, 2022). Lighthouse CEO Denis Jordanidi told Kommersant that next year it is also planned to sell an issue denominated in yuan. At the same time, he noted that the company approached the Bank of Russia with proposals to legalize payments in foreign currency directly, without converting into rubles. Currently, OIS does not have such an option.

Thus, in the Wone IT DFA release, calculations will be made in rubles, linked to the euro exchange rate established by the Central Bank. The company’s press service notes that placing digital financial assets with a nominal value in euros and settlements in rubles makes it possible to attract financing through the structural form of digital financial assets. This allows investors to “gain currency exposure for their investment and receive a coupon at the current exchange rate on the coupon payment date.”

At the same time, the popularity of this financial instrument among investors will depend on their confidence in its stability and reliability, as well as on the issuer’s ability to provide sufficient guarantees for the fulfillment of obligations, notes Sergei Selivanov, development director of the multifunctional blockchain platform Bringold. In addition, DFA for foreign currency can become an additional tool for diversifying an investment portfolio, says Roman Nekrasov, co-founder of the ENCRY Foundation. Purchasing and storing foreign currency in Russian banks is now unprofitable; many banks have abandoned deposits in dollars and euros or reduced rates on such deposits, trying to reorient clients to other currencies, he added.

The attractiveness of issuing in foreign currency lies in the possibility of minimizing currency risks and bypassing obstacles associated with bank transfers, notes Sergei Selivanov. According to Mr. Nekrasov, currency DFAs can be used for cross-border payment for the services of foreign subcontractors or for payment for the services of the issuer ordered by foreign counterparties. In his opinion, such instruments are designed to reduce the risks associated with foreign exchange transactions, which have become more complex in the last two years. “Foreign counterparties have the opportunity to open an account in a Russian bank and receive payment in rubles, but it is not clear what to do with them later. Moreover, opening accounts in a Russian bank may be associated with the risks of secondary sanctions. The DFA does not have such problems,” the expert believes.

At the beginning of December, Alfa Bank announced its platform for issuing digital financial instruments for working with non-residents within the framework of the law, which will allow the use of digital rights when making payments in foreign trade. The bank explained to Kommersant that at this stage they carried out onboarding of non-residents—legal entities that can act as both issuers and investors. “The upcoming transactions will be of a test nature,” they added. At the same time, they are also beginning to place DFAs in foreign currency for Russian issuers abroad (see Kommersant on December 19).

However, it is necessary to consider the risks associated with the release of DFA, experts warn. These include, to the least extent, the potential volatility of the foreign currency exchange rate and, to the greatest extent, regulatory changes and technological risks associated with the platform on which the placement takes place, Mr. Selivanov points out.

Ksenia Kulikova