Cryptocurrency: Collateral for Secured Transactions?

Abstract

This article aims to summarize the present situation with regards to the use of cryptocurrency as collateral in secured transactions in the United States, Canada, the United Kingdom and France, and offer solutions to issues related to the use of cryptocurrency for this purpose. These proposed solutions are arranged as a framework that could be enacted in Canada, and elsewhere. The article first reviews the concept of a cryptocurrency, with special emphasis on bitcoin, and the concept of secured lending. Then, it discusses the categorization of bitcoin in the United States, Canada (with Ontario and Quebec as examples), United Kingdom and France. At this time, only the United States and Ontario have doctrinal and regulatory guidance when using cryptocurrency specifically for secured lending. Finally, this article proposes a legislative framework to take security interests in cryptocurrency in Canada, including drafts of specific statutory amendments for both Ontario and Quebec legislation. The article concludes by noting how this framework can be replicated elsewhere, notably in the United States, the United Kingdom and France.

Keywords: cryptocurrency, collateral, secured transaction, lending, bitcoin, article 9