from their insolvent custodian, by means of an action for segregation. The latter have a right of segregation and can withdraw their assets from the insolvency proceedings, e.g. Rather, assets that do not belong to the insolvency estate must be handed over to the actual owners or other beneficiaries. Assets which are not owned by the debtor shall, in principle, not form part of the insolvency estate. Right to segregation of crypto assetsĪccording to Austrian insolvency law, (only) the entire assets of the debtor (insolvency estate) serve to satisfy its creditors. For them, it is important to take a closer look at the contractual provisions of their account, especially whether ownership of the crypto assets has been acquired at all and how they are held in custody. Instead, they leave their crypto assets on the exchange. In practice, however, crypto investors often lack the know-how and interest to set up their own provider-independent wallet. For crypto investors, the question therefore arises: what is the best way to avoid a total loss of my crypto assets? Not your keys, not your coinsĪccording to the crypto aphorism “not your keys not your coins”, the answer seems quite simple at first glance: if you use your own desktop or hardware wallet, which is independent of any crypto exchange, to store your coins, you have nothing further to do with the insolvency of the crypto exchange. Special provisions, such as for the custody of securities under the Austrian Securities Account Act ( Depotgesetz), are not directly applicable. In the absence of specific regulations in Austria, domestic crypto investors face legal uncertainties with respect to the insolvency of their crypto custodian. The most important Austrian-based exchange is bitpanda. More than 500 international crypto exchanges are listed there. The importance of crypto exchanges for the financial markets is evident by taking a look at the comparison site coinmarketcap. The financial woes of BlockFi (a crypto bank) as well as Genesis (a crypto broker) are an open secret in the crypto community. The crypto bank Celisius and the crypto custodian Nuri (formerly Bitwala) have been insolvent since 2022. For example, the Australian crypto exchange My Crypto Wallet collapsed in 2021. The FTX bankruptcy is not an isolated case. Many casual investors have also lost their savings on the collapsing exchange. Not only institutional investors have been affected. The bankruptcy of the crypto exchange FTX is a dramatic turn of events for the blockchain world and has further damaged confidence in the crypto market. This article is also available in German below How safe are customers’ crypto assets in the insolvency of their crypto custodian?
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