#cryptoinsolvencyseries – User Agreements and the ownership conundrum

Imagine Australian crypto-exchange (HudCoin) is placed into external administration and your Crypto Assets and Fiat Currency are sitting in your user account.

TODAY’S QUESTION:

Is ownership with HudCoin for the benefit of creditors or user owned or something else?

I think we need to determine this before we determine the question of whether Crypto Assets are even capable of being ‘owned as an asset?’ (Or are they a commodity?) … as it’s that party’s problem then.

Read more about my #cryptoinsolvencyseries here: #cryptoinsolvencyseries: Introduction

In all of the cases I read on Today’s Question, the Court looked at the User Agreement.

So I did a deep dive of 8 relatively well known cryptoexchange‘s User Agreements. I actually looked at about 20 User Agreements, but many had little to no details. This was only a subset of many thousands of others not reviewed.

I looked at key terms, like:

  • ownership/title
  • security/liens
  • how Fiat is held (custody? trust? mixed in general assets)
  • Fiat segregated from other funds?
  • private keys stored by the exchange?

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What I found, was quite alarming!

4 out of the 8 exchanges didn’t give me a straight answer.

Others were mixed: 2x trusts, 1x custody in Singaporean bank, and 1x that might require equitable tracing.

… lawyers know how hard and expensive equitable tracing is.

ANSWER

A trust-beneficiary-relationship argument is worthy; but hope HudCoin has a fair User Agreement.

svvoidables cryptoassets

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