We Got the Kingdom, We Got the Key: Corporate Bankruptcy and Cryptocurrency

Stanford Journal of Blockchain Law & Policy, Vol 6, Issue 2, 2023 (Forthcoming)

Seton Hall Law School Legal Studies Research Forthcoming

32 Pages Posted: 31 Mar 2023

Date Written: March 29, 2023

Abstract

This Article proceeds as follows. Part I provides a concise overview of cryptocurrency. It develops the distinction between speculative and pegged cryptocurrencies, which has important insolvency and regulatory implications. Part II turns to the problem of cryptocurrencies themselves in bankruptcy. It shows that the issue is more significant with regard to pegged crypto, and identifies several holes in the present Bankruptcy Code’s ability to address such a bankruptcy filing. Part III turns to the question of crypto brokers in bankruptcy. The status of customer claims in such bankruptcy cases and the suitability of chapter 11 for such debtors are the key issues here. Part IV concludes with a consideration of possible reforms, including clarifying amendments to the Bankruptcy Code and the creation of disclosure obligations to alert retail investors to the risks they face upon insolvency of either a pegged cryptocurrency or a crypto broker. But ultimately I doubt the need for substantial changes to the Code, but rather argue for slight changes along with continued skepticism about subsidizing purported innovation through changes to bankruptcy law.

Keywords: Crypto; chapter 11; bankruptcy; Tether; FTX

Suggested Citation

Lubben, Stephen J., We Got the Kingdom, We Got the Key: Corporate Bankruptcy and Cryptocurrency (March 29, 2023). Stanford Journal of Blockchain Law & Policy, Vol 6, Issue 2, 2023 (Forthcoming), Seton Hall Law School Legal Studies Research Forthcoming, Available at SSRN: https://ssrn.com/abstract=4404167

Stephen J. Lubben (Contact Author)

Seton Hall Law School ( email )

One Newark Center
Newark, NJ 07102-5210
United States
973-642-8857 (Phone)

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