Digital financial assets, more particularly cryptocurrency, may serve fast, cheap, easy to use and global payments. They also represent regulatory concerns and financial stability implications. A robust (but costly) supervisory system needs to be put in place. Such a system may however play a defensive game. A segment in this area is depositing cryptocurrency with cryptocustodians, such as crypto-exchanges. From a private law angle there is a need for assessing the legal risks involved. A witness here is the fall of crypto-exchanges such as Cryptopia (New Zealand), QuadrigaCX (Canada), BitGrail (Italy) and Cointed GmbH (Austria).
University of Leiden authors Matthias Haentjens, Tycho de Graaf and Ilya Kokorin bring together know how and expertise on financial law, IT law and international private law. They have contributed to conferences at Harris Manchester College and (although note live, because of corona) at the National University of Singapore, on the theme of the Future of Banking and Finance in the Digital Era. As to the cases mentioned, the authors find that the qualification of the contractual and property law rights of crypto-investors is problematic. They discuss which rights crypto-investors can and should be able to assert in case a crypto-custodian falls insolvent.
To answer this question, the (legal) qualification of bitcoin is analysed (can it be owned and if so, how can such ownership be created and transferred?) and the status of deposited bitcoins is discussed (do stored crypto-assets form a part of the crypto-custodian’s insolvency estate or can they be revendicated by customers?). Private international law aspects form the starting point of the legal analysis (which court has jurisdiction to open insolvency proceedings and hear crypto-investors’ claims, and what law applies to such claims?) and the analysis is based on the current terms and conditions of major crypto-custodians. So a detailed nose dive into cryptocurrency, crypto-custodianship, digital intermediation and cryptoexchange seen in the context of property law, insolvency law and private international law, see ‘The Failed Hopes of Disintermediation: Crypto-custodian Insolvency, Legal Risks and How to Avoid Them, an electronic copy of which is available at: https://ssrn.com/abstract=3589381