Crypto–assets in insolvency
Produced in partnership with Charlotte Moller and Claude Brown of Reed Smith
Crypto–assets in insolvency

The following Restructuring & Insolvency guidance note Produced in partnership with Charlotte Moller and Claude Brown of Reed Smith provides comprehensive and up to date legal information covering:

  • Crypto–assets in insolvency
  • Crypto–assets—the basics
  • Insolvency and restructuring in the context of crypto-assets
  • When might insolvency connect with a crypto-asset?
  • Key issues in a crypto-asset related insolvency
  • Potential solutions to these issues

Crypto–assets—the basics

In its simplest form, crypto-assets are a virtual currency which uses encryption to verify transactions denominated in that currency. Payments which use crypto-assets generally take place on a peer-to-peer basis, without the need for intermediaries such as payment processors, thus offering increased speed and lower transaction costs.

For further reading on the formation of crypto-assets, see:

  1. Fintech—overview and Crypto-assets—overview

  2. Practice Note: Cryptoassets—essentials

Insolvency and restructuring in the context of crypto-assets

In this Practice Note, we consider some of the issues that an insolvency professional (including an insolvency practitioner (IP)) might face if appointed to deal with a crypto-asset related insolvency. This Practice Note does not consider the implications of crypto-assets in a personal bankruptcy scenario.

It is widely acknowledged that legal and regulatory oversight of crypto-assets is somewhat behind the curve. Taking a focused look at the potential implications of a crypto-asset insolvency, it is clear that the route to restructuring, recovering or winding down the affairs of an entity connected with crypto-assets is far from established.

When might insolvency connect with a crypto-asset?

Given the surge in the adoption of crypto-assets, it is within contemplation that corporate failures will arise in this sphere in the coming months and years.

There have been high-profile insolvencies of crypto-asset exchanges, which show that this is a real concern. For example,