Cryptocurrency In A Declining Market: What Lawyers Need To Know About Bankruptcy, Regulation, And Other Trends

Like any other investment, cryptocurrency can be exciting and rewarding when the market is hot — and when it cools down, investors, funds, and the lawyers who advise them can face tricky questions.   

As noted in a recent Practising Law Institute Briefing, Cryptocurrency and Bankruptcy: What Lawyers Need to Know Now That “Crypto Winter” Is Here, crypto is not immune to the effects of a declining market — nor to bankruptcy and its related laws. 

During the information-packed One-Hour Briefing, presenter Noah Schottenstein, of DLA Piper, walks attendees through the basics of the crypto finance market, defining its unique features as compared to traditional finance. He goes on to explore novel legal issues that bankruptcy courts are only beginning to face. 

As explained by Schottenstein, the “crypto winter” that began earlier this year was associated with the crash of the Terra/Luna cryptocurrencies. The dramatic dip in the crypto market ultimately saw high-profile bankruptcy filings, including the Three Arrows Capital hedge fund and the retail-focused crypto platforms Voyager and Celsius. 

The Briefing continues with discussion of topics such as the application of avoidance actions to cryptocurrency transactions, the types of claims and protections retail “depositors” and other counterparties may hold in bankruptcy proceedings, and the overlay between regulatory structures and bankruptcy law.

In-house counsel, outside attorneys, and compliance, finance, and other allied professionals interested in the structure of cryptocurrency finance markets and bankruptcy law can get up to date with this program — and learn why expectations surrounding the impact of bankruptcy may be upended in this evolving landscape. 

Crypto and securities regulation 

The bankruptcy program comes at a time when the intersection of regulations and crypto is an increasingly hot topic. At The SEC Speaks in 2022, presented by PLI with the SEC in Washington, D.C. on September 8 and 9, a main topic was “crypto, crypto, crypto,” said Kurt Wolfe, co-host of PLI’s inSecurities podcast, in an episode about the conference. “Every single panel that I attended talked about crypto, even some of the ones you wouldn’t think of, like trading and markets,” he said. 

Wolfe and co-host Chris Ekimoff discussed the significance of Chairman Gensler’s opening remarks for The SEC Speaks, titled “Kennedy and Crypto.” In his speech, the Chairman asserted, “Nothing about the crypto markets is incompatible with the securities laws. Investor protection is just as relevant, regardless of underlying technologies.” 

Interested in learning more? 

PLI offers a wealth of resources on cryptocurrency.

If you’d like to brush up on the basics, check out the one-day program Think Like a Lawyer, Talk Like a Geek 2022: Get Fluent in Technology, taking place via live webcast and in person on October 14. This unique program is designed to give lawyers the necessary background to become more knowledgeable advocates in technology-related matters and understand the emerging trends in this field, including blockchain, cryptocurrencies, and NFTs. 

For those interested in diving into the growing crypto trend of DAOs, or decentralized autonomous organizations, PLI will offer Decentralized Automated Organizations (DAOs): Practical Applications and Legal Framework. Register for the November 16 One-Hour Briefing to learn how DAOs have the potential to disrupt the traditional economic system as they become active investors and lenders, while raising significant issues of securities, tax, and corporate law. 

See additional crypto-related content on PLI’s website. 

Practising Law Institute is a nonprofit learning organization dedicated to keeping attorneys and other professionals at the forefront of knowledge and expertise. PLI is chartered by the Regents of the University of the State of New York and was founded in 1933 by Harold P. Seligson. The organization provides the highest quality, accredited, continuing legal and professional education programs in a variety of formats which are delivered by more than 4,000 volunteer faculty including prominent lawyers, judges, investment bankers, accountants, corporate counsel, and U.S. and international government regulators. PLI publishes a comprehensive library of Treatises, Course Handbooks, Answer Books and Journals also available through the PLI PLUS online platform. The essence of PLI’s mission is its commitment to the pro bono community. View PLI’s upcoming programs here.