Eternity Law International — News — Cryptocurrency and Bankruptcy

Cryptocurrency and Bankruptcy

Published:
October 17, 2022

Despite being a relatively new phenomenon, cryptocurrencies are already fraught with problems. One area where new and complicated problems about assets, liabilities and contractual responsibilities concerning digital money are raised is bankruptcy. Topic “Bankruptcy And Crypto” is very important and relevant. Thus, In this article we overview dealing with cryptocurrency in a bankrupt estate.

Do you have to declare your bitcoin holdings when filing for bankruptcy?

There isn’t much case law on the subject of crypto, but it is unmistakably an asset that needs to be reported. Everything of a debtor’s property must be revealed in a bankruptcy proceeding.

The most pertinent question about disclosure concerns whether or not a trustee may find bitcoin if a debtor does not declare it as an asset and fails to notify his or her counsel. Given that bitcoin is seldom a common asset and that many people might not be aware that it qualifies as an asset that requires disclosure, such non-disclosure could be harmless enough. Of course, deliberate withholding of information might result in legal action.

It might be difficult to take possession of crypto assets and extract value from them. Crypto holder is assumed the administrator of the crypto stored in the e-wallet. Trustees or another bankruptcy expert will thus need the debtor’s help in getting the access to realize any crypto assets housed in the virtual wallet; otherwise, they will not have enough authority over or accessibility to the crypto assets to be able to do so.

Crypto definition

Such digital currency possesses traits common to many assets. First of all, since it resembles cash in certain ways, bitcoin might be categorized as money. It is tradable for goods and services. Nowadays there are even nations that accept tokens as legal cash.

Numerous aspects of cryptocurrency are similar to those of usual assets. Despite the fact that cryptocurrency is commonly traded on the exchange market, neither standard stock exchanges nor any governance recognizes it as a financial or negotiable instrument.

Cryptocurrency has a potential worth that recommends being revealed despite the uncertainties. It is ought to at minimum be listed as an “other asset” in a debtor’s asset schedule.

How to estimate the worth of a holding of cryptocurrencies

The most challenging cryptocurrency-related issue may be valuation. Even if the debtor categorizes and identifies the asset correctly, how is it rated? The ability to exclude all or any of the cryptocurrencies may depend on valuation. Regardless, there isn’t a distinct market, and prices are prone to extreme swings. Any trustee considering a cryptocurrency would probably want aid in comprehending the software for that coin and accessibility to the exchange where that operate cryptos.

If you have issues with cryptocurrency company bankruptcies, our team of specialists can consult you, just contact us.

Criminal cryptocurrency exchanges

Transfers of virtual assets 2 years after a bankruptcy filing might be considered fraudulent, just like transfers of any other asset, if the essential conditions are met. Such a transfer happens when a debtor, whether willingly or involuntarily, does so with the genuine intention of impeding, delaying, or defrauding any organization to whom the debtor owes money.

Please contact us to get more information.

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