Businesses worldwide are feeling the pressure of historic inflation and rising interest rates. UK insolvencies have reached their highest level since 2009, while numbers are also increasing in Australia, Canada and China.

This article examines the latest restructuring and insolvency trends – including zombie companies, landmark court decisions, and new legislation in Canada and the EU.

‘Zombie companies’ could lead to a wave of insolvencies

On 30 October 2023, HM Treasury (HMT) published three documents setting out how the UK government plans to regulate cryptoassets going forward:

The High Court in Singapore has ordered the winding up of Hodlnaut Pte Ltd, a Singapore based cryptocurrency lending and borrowing platform, as it was cash flow insolvent given that the cryptocurrency funds held by the company from various creditors count as ‘debts’ within the meaning of s125(1)(e) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA).

Celsius’ retail borrowers finally have an answer on who owns the cryptocurrency they deposited into Celsius in exchange for a loan from Celsius – spoiler alert: on November 13, 2023 the bankruptcy court held that Celsius’ terms of service “clearly and unambiguously” gave Celsius ownership of retail borrowers’ cryptocurrency. The bankruptcy court’s decision follows its January 2023 decision which similarly held that the cryptocurrency of Celsius’ “Earn” customers also belonged to Celsius because the terms of service similarly unambiguously granted Celsius title ownership.

This week:

HM Treasury has published a response to its consultation on managing the failure of systemic digital settlement asset firms.

On 30 October 2023, HM Treasury (“HMT”) published 3 key updates on its proposed approach to regulating cryptoassets under the UK’s financial services regulatory framework, namely:

On 30 October 2023, the UK government published an update on its legislative approach for regulating fiat-backed stablecoins, following on from its consultation on the UK regulatory approach to cryptoassets and stablecoins in January 2021, and the response to that consultation in April 2022. Alongside this, it published a response to its consultation on the approach to managing the failure of systemic digital settlement asset (DSA) (including stablecoin) firms.

In this second part of our blog exploring the various issues courts need to address in applying the Bankruptcy Code to cryptocurrency, we expand upon our roadmap.

Many authorities and commentators have considered cryptocurrencies, and the blockchains that undergird them, as a potentially disruptive force in the financial industry. Now, that disruption has made its way to a different side of finance—bankruptcy, and during the past year, the United States bankruptcy courts have had to confront many unexpected challenges involved in dealing with cryptocurrency.