Cryptocurrency is becoming more and more popular throughout the world.
And while cryptocurrency has largely gone unregulated by governments,
more and more nations are starting to take a stance on cryptocurrency
in regards to regulations and law. While the world’s legal and government
sectors have been trying to catch up with legislation for cryptocurrency,
one area of law that has seen significant movement on the issue is
In the Northern District of California’ s U.S. Bankruptcy Court,
Judge Montali issued the following order that clarifies what cryptocurrency is not:
“The court does not need to decide whether bitcoin is currency or
commodities for purposes of the fraudulent transfer provisions of the
bankruptcy code. Rather, it is sufficient to determine that, despite defendant’s
arguments to the contrary, bitcoin is not United States dollars.”
If cryptocurrency is not a U.S. dollar, then how should it be classified
when it comes to bankruptcy cases? According to the Uniform Commercial
Code (UCC), bitcoin isn’t money because it is not a “medium
of exchange currently authorized or adopted by a domestic or foreign government.”
If Cryptocurrency Isn’t Money, What Is It?
According to UCC Article 9, Secured Transactions, cryptocurrency appears
to fall under “general intangible,” which “means any
personal property, including things in action, other than accounts, chattel
paper, commercial tort claims, deposit accounts, documents, goods, instruments,
investment property, letter-of-credit rights, letters of credit, money,
and oil, gas, or other minerals before extraction.”
If classified as a general intangible, a debtor’s personal property
can be subject to a creditor’s interest in the property. The creditor
will then have a “security interest” in the cryptocurrency.
This means the creditor can sell the property to satisfy a debt the debtor
defaulted on. Because cryptocurrency can be classified as a general intangible,
the financial statements that create a perfection can be filed in the
debtor’s jurisdiction and are not reliant on possession or control.
Looking at the bankruptcy code, particularly Section 541, cryptocurrency
falls under “property of the estate.” Section 541 says property
of the estate includes “all legal or equitable interests of the
debtor in property as of the commencement of the case.”
Although cryptocurrency can be traced through a debtor’s various
financial statements, the volatility of the currency can create problems
Get Help From a Bankruptcy Lawyer Today
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