Stablecoins in Bankruptcy

16 Pages Posted: 20 Jul 2023 Last revised: 12 Dec 2023

See all articles by Kara J. Bruce

Kara J. Bruce

University of North Carolina (UNC) at Chapel Hill - University of North Carolina School of Law

Christopher K. Odinet

Texas A&M University School of Law

Andrea Tosato

Southern Methodist University - Dedman School of Law

Date Written: October 1, 2022

Abstract

Summer 2022 has been a scorcher, but the crypto market is in winter. In recent weeks, the crypto market has plunged by $2 trillion. Several crypto service companies face financial distress, seeking emergency loans or filing for bankruptcy protection. Even stablecoins, cryptoassets touted for their low volatility, did not avoid the fallout.

Now that the bloom is somewhat off the rose for stablecoins, investors, lawmakers, and legal thinkers are beginning to consider more seriously the impact that the failure of these cryptoassets might have on their holders. Doing so involves difficult questions about what stablecoins are, who issues them, what rights holders of stablecoins enjoy, and what coinholders’ legal position would be in the event of a bankruptcy. We have spent the past several months working to answer these questions, mining the terms of service of leading stablecoin issuers to assess coinholder vulnerabilities in a stablecoin collapse or insolvency scenario. Our broader study of these issues is forthcoming in the Arizona State Law Journal. This Law Letter offers an expanded bankruptcy analysis of these matters.

Reprinted from Bankruptcy Law Letter, Volume 42, No. 10, October, 2022, with permission. Copyright © 2022, Thomson Reuters. For more information about this publication, please visit https://legal.thomsonreuters.com/en/products/law-books.

Keywords: cryptocurrency, stablecoins, bankruptcy, contracts

Suggested Citation

Bruce, Kara J. and Odinet, Christopher K. and Tosato, Andrea, Stablecoins in Bankruptcy (October 1, 2022). Bankruptcy Law Letter, Vol. 42, No. 10, 2022, U Iowa Legal Studies Research Paper No. 2023-41, Texas A&M University School of Law Legal Studies Research Paper No. 24-34, Available at SSRN: https://ssrn.com/abstract=4507047

Kara J. Bruce (Contact Author)

University of North Carolina (UNC) at Chapel Hill - University of North Carolina School of Law ( email )

102 Ridge Road
Chapel Hill, NC 27514
United States

Christopher K. Odinet

Texas A&M University School of Law ( email )

1515 Commerce St.
Fort Worth, TX Tarrant County 76102
United States

Andrea Tosato

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

HOME PAGE: http://www.smu.edu/law/faculty/profiles/tosato-andrea

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