Virtual Currency: State of pandemonium continues

Arthur C. Clarke famously observed: “Any sufficiently advanced technology is indistinguishable from magic.” Our regulatory, legislative, and judicial systems illustrate this principle whenever new technology exceeds the limits of our existing legal framework and collective legal imagination. Cryptocurrency, such as bitcoin, has proven particularly “magical” in the existing framework of bankruptcy law, which has not yet determined quite what bitcoin is—a currency, an intangible asset, a commodity contract, or something else entirely.

Christchurch based company Cryptopia Limited (in liquidation) (Cryptopia) operated a cryptocurrency exchange. Account holders were able to deposit cryptocurrencies into the exchange, and carry out trades with each other.

In January 2019 the exchange was hacked and cryptocurrencies valued at approximately NZD30m were stolen. Cryptopia closed after the hack, re-opened for a short period, and was then placed into insolvent liquidation in May 2019. David Ruscoe and Russell Moore of Grant Thornton New Zealand were appointed liquidators.

Introduction

Switzerland is home to one of the world's largest cryptocurrency ecosystems, the so-called 'Crypto Valley' in the city of Zug. However, with cryptocurrencies growing in popularity, problems are inevitable.

The general view in Switzerland is that cryptocurrencies are intangible assets sui generis and as such can be subject to regular debt enforcement and insolvency proceedings in Switzerland (provided that these cryptocurrencies have a financial value).

This article highlights the particularities to be considered when cryptocurrencies are the target of an attachment procedure (ie, a freezing order) in Switzerland.

Attachment

The following must be established to obtain an attachment in Switzerland:

This article was first published in The Commercial Litigation Journal.

We previously considered the potential implications for insolvency professionals of the rise of cryptocurrencies (available here). One of the principal issues identified was the uncertainty surrounding the legal status of cryptocurrencies; what class of asset were they and, subsequently, how would they be treated under English law?

There are today at least 2,352 different types of cryptocurrencies being traded on various exchanges¹. As legislators, regulators, financial institutions, and other businesses have been seeking to understand the opportunities and risk presented by cryptocurrencies, smart contracts, and other fast-moving Fintech developments since the launch of Bitcoin around 10 years ago, on 18 November 2019 the UK Jurisdiction Taskforce of the Lawtech Delivery Panel published a Legal Statement² in relation to cryptoassets and smart contracts, following a period of public con

In a recent report by INSOL International, only 5% of insolvency practitioners (“IPs”) said that they had a “comprehensive or practical/working or understanding” of crypto-currency.

So with over 4,000 types of cryptocurrency now available and as payment technology continues to develop, we look at some issues facing IPs, including

• • How to identify cryptocurrency
  • How to categorise it
  • How to take control of it and sell it; and
  • What value does it have

What are cryptocurrencies?

Introduction

As society’s technology continues to grow more and more complex, bankruptcy attorneys find themselves on the front lines of an ever-evolving legal practice. One such emerging technology, cryptocurrency, has only just begun to become a new thorn in the sides of bankruptcy attorneys and requires their increased attention.

What is Cryptocurrency?