Lending (not) in crypto: The NBU has warned about the risks of partnering with the BitCapital service.

The relevant decision was made by the regulator on February 4, as stated in the NBU press service's announcement.

"The National Bank of Ukraine, following an analysis of transactions conducted by the BitCapital service, found indications that such transactions constitute a financial service for providing loans, which violates the Law of Ukraine 'On Financial Services and Financial Companies.' To evade compliance with Ukrainian legislation, this service is disguised in contracts with consumers as the provision of loans in crypto-assets," the regulator reported.

It is noted that although loans are formally issued in USDT, in reality, borrowers received loans in hryvnias. This means that the service is providing microloans in Ukraine without any permits or licenses.

The lack of licenses allowed the BitCapital service to offer loans while circumventing restrictions on maximum interest rates. Furthermore, the service's collectors violated established legal rules for debt collection, blackmailing and terrorizing borrowers.

The NBU added that they had received over 700 complaints from Ukrainians regarding the service. Consumers most frequently complain about the high interest rates and uncivilized debt collection practices.

"Socially vulnerable groups of the population, as well as military personnel, were particularly affected, as the company denied them the benefits provided by Ukrainian legislation and aggressively pursued debt collection," the regulator added.

According to the NBU, the BitCapital service belongs to the non-resident company GOLDEN INTEREST GROUP LIMITED, which is registered in Britain. The National Bank has already contacted the British regulator to take appropriate measures against the company.

Funds to BitCapital clients were transferred through illegal schemes. "In fact, funds were sent to consumers' accounts via p2p transfers using a network of drop accounts," explained Olga Lobaychuk, head of the consumer rights protection department for financial services.

As a result, the NBU has no direct levers to stop the flow of funds to potential BitCapital borrowers.

As explained by the National Bank, their decision will have several consequences for BitCapital's operations. Firstly, the regulator has deemed the reputation of key individuals, managers, and owners of the institution as not impeccable. Secondly, the National Bank prohibited all companies licensed by the NBU from cooperating with the institution (for example, by sharing information from credit history bureaus).

Thirdly, the NBU's decision may be useful in court cases regarding the invalidation of loan agreements with BitCapital. Additionally, law enforcement agencies can reference this NBU decision while investigating the illegal activities of the service in Ukraine.

"To ensure proper and timely information to consumers regarding any identified facts of financial services being provided without a license or services that exhibit signs of financial activity, reports about such services are published on the official website of the National Bank," the NBU added..