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The institution of guarantorship is increasingly shifting from a ‘formality’ for financial institutions to a genuine risk, entailing full financial liability. After all, the guarantor is financially liable for the debt in the same way as the borrower themselves. In a case published by legal reviews, the court ordered a guarantor to pay over 800,000 for the principal debtor’s overdue loan – thus, courts not only in Europe but also in Ukraine are increasing the pressure on guarantors.
Crypto accounts, Bitcoin, stablecoins and other crypto assets are becoming visible to state authorities, and attempts by debtors to convert assets into cryptocurrency to avoid having their accounts frozen will increasingly result in subsequent enforcement proceedings. Lawyers are already noting an increase in disputes where crypto-assets are considered as a potential subject of enforcement proceedings.
Although cryptocurrency is not currently an official means of payment in Ukraine and the legislation is only in the process of establishing a comprehensive framework for dealing with virtual assets, the Law ‘On Virtual Assets’ has already recognised cryptocurrency as a distinct type of intangible asset. It is precisely this legal fact that paves the way for the future seizure of crypto-assets within the framework of enforcement proceedings, and whilst debtors previously regarded Bitcoin or USDT as a ‘secret digital safe’ that could not be found, in today’s reality the situation is changing daily.
In Spain, tax authorities and courts are already actively dealing with debtors’ crypto assets, and courts are increasingly recognising cryptocurrency as property that can be seized as part of debt recovery. The Agencia Tributaria has the right to request information from crypto exchanges regarding citizens’ accounts, and banks and financial platforms are obliged to provide data on digital assets.
In general, a similar trend is observed across the European Union. This, in turn, means that the anonymity of cryptocurrencies in Europe is rapidly disappearing. After all, the MiCA regulation, which is gradually coming into force across all EU countries, effectively places the crypto market under strict financial supervision. Crypto exchanges and crypto-asset operators must carry out customer identification, comply with AML/KYC requirements and cooperate with state regulators.
In Ukraine, legal and judicial practice is increasingly demonstrating greater rigour: Ukrainian courts are interpreting guarantee agreements more strictly, and the guarantor bears joint and several liability unless otherwise expressly stipulated in the agreement.
This refers to the mechanism of ‘joint and several liability’ provided for in Articles 553–554 of the Civil Code of Ukraine. If a borrower defaults on a loan, the bank or financial company has the right to seek recourse not only from the borrower but also from the guarantor. In many cases, the creditor is not even obliged to first exhaust all avenues of recovery from the principal debtor. At the same time, the courts recognise certain limits: if the bank or credit institution has altered the terms of the loan without the guarantor’s consent, or has missed the prescribed deadlines for bringing proceedings.
Lawyers from the EU, Spain and Ukraine predict that the next stage will be the automation of enforcement agencies’ access to all digital assets. In the future, the principle and procedure may resemble the seizure of a bank account – via an electronic request to a licensed crypto exchange.
The European financial system is moving towards a model where it is becoming increasingly difficult to hide debts – whether in a bank or in cryptocurrency. And a guarantor who agrees to act as a guarantor for someone else’s loan risks not only money or property, but also digital assets.
