The Russian digital rights market has passed the “test in practice” stage over the past two years. If at first simple debt constructions in the DFA format prevailed, now it is logical that a request arises for instruments that simultaneously give the investor an understandable financial profitability and a link to a real product or service. It is in this niche that hybrid digital rights (HDRs) fall.
According to the definition of the Bank of Russia, HDRs are digital rights that simultaneously include elements of the DFA and other digital rights (in practice, utilitarian digital rights, UDR). This means that in one issue you can combine a monetary claim and a property claim for a product, work or service.
Context plays an important role here. According to the Bank of Russia, the volume of CFA initial placements in 2024 increased almost 9 times and amounted to 594 billion rubles, and the market continued to expand due to new issuers and more complex structures. That’s why the HDRs do not look exotic, but a natural complication of the product line.
How HDRs work and why they expand the scope of “classic” digital products
The design of the HDR allows you to pack into digital form two scenarios for the fulfillment of the obligation – thereby attracting different types of liquidity.
If we simplify the mechanics to the level of investment logic, HDRs usually answer one question: what exactly does the holder receive on the expiration date? Cash payment – as for a financial instrument (DFA logic). The product or service as for a prepayment/enforcement right (UDR logic).
At the same time, it is important that UDR in the Russian legal structure means digital rights, including the right to demand the transfer of the subject, the results of intellectual activity, the performance of work or the provision of services. CFAs, in turn, are regulated by a separate law and cover digital rights, which include monetary claims and a number of other financial rights.
This gives rise to the key property of the HDR. You can simultaneously use “discount as the economy of a real product” and “interest/payment as financial motivation.” As a result, not only suppliers and future consumers are added to the transaction, but also financial investors – precisely due to the more familiar profitability profile and understandable exit conditions.
Where regulation and practice are most vulnerable today
If we talk about really sensitive places, then in the current market configuration, it is not the technological infrastructure that looks the weakest, but the tax and accounting interpretation.
The Bank of Russia explicitly indicates that the fulfillment of obligations under digital rights can occur both automatically (including through a smart contract) and outside the platform with subsequent confirmation of repayment in the information system. That is, the basic execution infrastructure is already conceptually provided and working. Therefore, key questions are shifting to the area of how to qualify correctly the economy of the instrument for taxes and accounting.
I would highlight three practical nodes that require the most clarity. This is where point regulatory risks most often arise:
- VAT and the moment of the tax base. If the structure has the right to receive a service/product, the question arises: what exactly is considered implementation and when it occurs – at the time of placement of the HDR (as an advance payment) or at the time of the actual provision of the service or delivery.
- Accounting qualification of the issuer’s obligation. Depending on the terms of issue, the same instrument may appear as a financial liability or as a liability under a contract with a customer (contractual liability), which affects the recognition of discount, interest and execution costs.
- Taxation of investor income. Income can be formed as a percentage or coupon, as a discount effect, as a difference in secondary circulation, or as savings in obtaining a service. It is critical for the market that the practice is uniform and does not generate surprises on inspections.
At the same time, I see no reason to talk about systemic risks for the HDR market right now. The tool is suitable for practical use – precisely because the legal framework for the DFA and UDR exists, and the HDRs, by definition, are built on their combination. The risks are now rather special: how exactly the issue is described, how the execution is confirmed, how the tax contour is built at the issuer and at the holder.
Why real estate and HoReCa are a natural environment for HDRs
Real estate and HoReCa provide something that financial products often lack – an understandable underlying asset and a predictable execution economy.
For HoReCa, the model is especially organic, where the basic right is the accommodation service (room/accommodation package) or related service. In such a model, the issuer can lay down an attractive discount for the investor, because the variable costs for an additional guest are usually low, which means that there is space for margin without loss of quality. At the same time, the tool allows to attract financing for the construction, renovation or development of infrastructure in advance, without selling the object itself and without diluting the capital. Finally, depending on the conditions of the issue, the investor gets a choice: to exercise the right naturally, that is, to use the service, or to receive a cash equivalent, if this is the logic of execution and market conditions.
A separate factor is the tax environment of the industry. At the level of the current fiscal policy, the VAT rate of 0% for temporary hotel accommodation services has been extended until December 31, 2030 (subject to the conditions for the application of benefits). This markedly simplifies the economics of products tied to accommodation compared to commodity histories, where VAT becomes a key design element.
In real estate, I would look at the HDR not as a digitization of ownership, but as a tool for financing a project through rights to future use tied to an object. We are talking about rights to future services and consumption scenarios – accommodation, short-term rent, service packages, access to infrastructure. This is more accurate legally and, as a rule, easier operationally.
What is needed for HDRs to become a sustainable element of the market
Speaking without slogans, the conditions for sustainability as a whole have already developed. There is a legal framework for DFA and UDR, there is supervisory logic and a working infrastructure for the issue and repayment of digital rights. The next step is not “another law for the sake of the law,” but the accumulation of practices that will remove tax and accounting uncertainties.
I expect that it is the tax interpretation (including VAT and the accounting procedure) that will become the main field of adjustment. At the same time, the scaling of hybrid formats looks realistic already in the current regulatory framework. Essentially, the market received a legal way to pack a prepayment for a future good or service into a form where the deposit becomes a standardized right with pre-described terms of income and performance.
That is why the UDR should not be considered as another digital product, but as a transition to the next stage of market development. At this stage, digital rights begin to serve not only borrowing, but also financing real demand and projects – especially in capital-intensive industries such as real estate and HoReCa.
By Alexander Tertychny, founder and CEO of the Green Flow hotel chain