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The Bankruptcy StrategistFeaturesBankruptcyLitigationTechnology Media and Telecom

How Bankruptcy Courts Will Treat Cases Involving Cryptocurrency Exchanges

By Richard J. Mason
February 01, 2019

The blockchain, or distributed ledger technology, has created a new and arguably more efficient and reliable way of recording data. Rather than storing data in a central location, the blockchain keeps a running tally in a decentralized network of computers that verify the source of "blocks" of data before adding them to the existing "chain." Although the blockchain has many applications, perhaps its most visible use is serving as an electronic platform for issuing and recording transfers of cryptocurrencies on the Internet. It is now estimated that there are over 1,600 forms of cryptocurrency, with bitcoin, ethereum and XRP being the most widely used.

Some cryptocurrencies function like currency. Some serve as an investment for speculators. Other cryptocurrencies are used like stocks or bonds, such as when an entity wishes to sell an interest in its enterprise through an initial coin offering or "ICO." Still others are referred to as "utility coins" and can be exchanged for specific goods or services, usually from the issuer.

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