A recent consultation published last month from the UK Jurisdiction Taskforce looked at these issues in the context of English insolvency law. We previously reported on how jurisdictions like the BVI and Hong Kong have applied English authorities recognising digital assets as property, which relied on earlier guidance by the UKJT.

The consultation noted several high-profile exchange collapses that demonstrate the value of established insolvency frameworks for digital assets. While English courts have not directly addressed this area, the UKJT believes English insolvency concepts can sensibly apply to a wide range of asset types. The UKJT’s proposed 'Legal Statement on Digital Assets and English Insolvency Law' aims to provide guidance by answering stakeholder questions. Representatives from law, insolvency and the crypto sector were invited to submit questions for consideration.

The key issues explored included whether digital assets constitute 'property' under insolvency law and form part of an insolvent estate. The statement clarifies that digital assets fall under the Insolvency Act's broad definition and so qualify as property. However, digital assets are yet to be treated as money in the UK, with the effect therefore that a statutory demand cannot be served in respect of a digital asset debt.

International jurisdiction rules determining an insolvent entity's 'centre of main interests' (COMI) location were also examined. While the location of digital assets poses challenges, the UKJT has said the focus should be on assessing commercial activities objectively seen to centre around the digital assets in questions. The UKJT noted that established principles of COMI have already been applied by the Singapore High Court over a crypto insolvency in the context of Singapore-based digital asset exchange, Zipmex.

The Statement addressed the question of whether claims to digital assets held by insolvent companies or individuals represent recoverable property rights. Proprietary claims entitle priority recovery against unsecured creditors, so resolving this distinction matters greatly. Furthermore, the interlocutory, investigatory and enforcement powers generally available to insolvency office-holders under English law are available in relation to the preservation, recovery and distribution of digital assets.

The Statement promises much-needed clarification of how long-established insolvency principles apply to the novel world of decentralised technologies. Its conclusions should boost confidence that English and common law insolvency regimes can accommodate new frontier assets coherently and fairly.

Although Harneys does not advise on the law of England and Wales, the UKJT’s Statement will undoubtedly be highly influential and heavily cited in English cases dealing with digital assets in insolvency settings, which in turn are persuasive in other common law jurisdictions, including the BVI, Bermuda and the Cayman Islands.