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The Cryptocurrency Craze

The use of cryptocurrencies is becoming more prevalent throughout the world. During the early days of Bitcoin, there was a relative absence of regulation or control by governments since there is no central issuing authority. Given the increasing use of cryptocurrencies, as well as the increased hacking of these currencies and bankruptcies of cryptocurrency firms, bankruptcy courts will likely have to weigh in on the various property rights of cryptocompanies. In the recent case of Hashfast Technologies LLC v. Lowe (In re Hashfest Technologies) (Bankr. N.D. Cal. Feb. 22, 2016), Judge Montali authored one of the first reported decisions in this area. Whether cryptocurrencies constitute a commodity, currency or general intangible is critical for purposes of avoidance action recovery. How cryptocurrencies are viewed in international jurisdictions may differ depending on the property right that the court assigns to them and whether or not those property rights are subject to clawback by bankruptcy companies. A recent IRS ruling stated that bitcoins are “property,” not currency. Judge Montali also concluded that bitcoins are not currency.

Cross-Border Insolvency Program
2018
Materials Year: 
Bankruptcy Rules: 
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