Many experts agree that people and businesses should change their attitudes towards Bitcoin and other crypto assets. Like other regulation areas, insolvency is dealing with an increase in mainstream crypto-asset use. Currently, this sector is facing several issues and looking for ways to address them.
When some people hear others utter the word “cryptocurrency,” they think about shady characters that want to steal their traditional money. Others assume that Bitcoin and other electronic currencies are for individuals on the dark web. But is this true? How should the world deal with cryptocurrencies in an insolvent estate?
Increasing Cryptocurrency Value
Bitcoin, as the premier digital currency, has undoubtedly enjoyed a drastic increase in value. And this is partly attributable to the changing perspectives, with some people no longer seeing it as a money-laundering technique. Today, some people see Bitcoin as a vital digital investment. That’s why more people are using platforms like https://bitqs.io/ to purchase and sell this digital currency. With such platforms, you can buy this virtual currency using traditional money.
Novice investors are gradually dipping toes in the water while large brands accept virtual currencies as payment methods. With more people converting conventional money into cryptocurrencies, these digital assets are becoming prevalent within insolvent estates. And what does this mean for bankrupts or companies creditors with cryptocurrency investments?
Bitcoin, like other digital currencies, is a decentralized form of money. That means it doesn’t have ties with any country’s currency. What’s more, this digital currency doesn’t have any regulations. Consequently, some people see it as a way of defrauding them. But, this is not necessarily true.
Bitcoin transactions are public, meaning people can trace and verify this virtual currency’s ownership. Since there’s no single body controlling this virtual currency, every user is accountable to all players in the Bitcoin network. Thus, transparency is the security feature because it’s difficult for a person to hide anything in the blockchain.
However, learning and understanding new terminologies and the process come with challenges. Consequently, some individuals hesitate to deal with Bitcoin. But unfamiliarity shouldn’t make a person ignore what might be a highly productive asset.
Therefore, finance professionals should change their perception of Bitcoin and other virtual currencies, especially business investments in their insolvency estates. What’s more, these experts should adopt processes for facilitating investors when dealing with cryptocurrencies.
How to Deal with Cryptocurrency in an Insolvent Estate
The first step is identifying a company with cryptocurrency. And you can do this in several ways. Ideally, determine whether an estate includes a cryptocurrency in any of these forms:
• Exchange transfers as indicated in the bank statements
• USB key’s presence in the records and books of a company
• Running daily keyword searches like “Bitcoin” or “crypto” against a company’s electronic records
• Identifying the seed phrases in the company records
• Inquiring from directors
After determining whether a company has Bitcoin or any other cryptocurrency as its investment, an insolvency practitioner should take the next step of securing and preserving it. That means ensuring proper security for the cryptocurrency, including locating and identifying the key. However, the practitioner shouldn’t assume that nobody else has a key copy.
The insolvency practitioner should also transfer the digital asset into a more secure wallet. Some states have regulations that require the person holding cryptocurrency on behalf of another person to obtain appropriate insurance.
Releasing Cryptocurrency after Successful Recovery
Like fiat money, crypto exchanges have varying conversion rates. That’s because digital currencies don’t have inter-bank offer rates. Also, there’s no standard for the conversion rate. Therefore, comparing conversion rates and exchanges is the most prudent approach.
Also, you can place cryptocurrency in an auction. That way, the insolvency practitioner can enjoy some protection from criticism regarding its value.
With the increasing cryptocurrency value and popularity, more businesses will undoubtedly invest in this digital asset. Therefore, finance professionals and insolvency practitioners should embrace this move and learn to deal with digital currencies as business assets.