SEPTEMBER 2022 Turnarounds & Workouts 6
Crypto Winter , from page 5
they explain .
Davidson and Smith believe that figuring out how to jam the crypto peg into existing legal / regulatory squares will simply take time for courts to work through . Ultimately new law , regulations , and case law likely will provide transparency and predictability . “ But crypto was created , in part , to exist above traditional borders and related legal and regulatory regimes . Resolving this tension will take time ,” they add .
Need for Clarity
Dendinger , Termine and Burns observe the crypto industry has been asking for regulatory clarity and the lack of it may be causing some businesses and innovation to move offshore to other countries who are moving swiftly to enact regulation specific to the industry . The Voyager case is the perfect example of trying to apply old law to new products and finding it is an imperfect fit , at best . They note : “ We are finally seeing movement in Congress to address this issue through multiple bills that have been introduced over the past few months to create a regulatory framework for digital assets . The overarching concern for members of Congress is consumer protection when dealing with risky assets such as cryptocurrency or NFTs . Cases like Voyager ’ s only heightens the urgency in Congress . Given the building urgency to act amount members of Congress , it is likely that some sort of legislation will be passed within the next year . How such legislation will define the assets , whether as commodities or securities or something else , will have significant impact on the potential growth here in the US .”
“ We have been urging clients to engage with members of Congress now to be able to shape the future of the industry as opposed to having the future shaped for them . Until there is
“ We are finally seeing movement in Congress to address this issue through multiple bills that have been introduced over the past few months to create a regulatory framework for digital assets .”
regulatory certainty , it is possible that the courts may be the ones to define digital assets and provide some clarity on a case-by-case basis . This will only further entrench the patchwork regulatory framework that currently exists .”
Davidson and Smith note : “[ Crypto ] assets form only part of blockchain and other distributed ledger technologies , including smart contracts . Recent reporting identifies more than 12,000 different types of crypto currencies alone . While these asset classes are growing exponentially through innovations across all industries , time is needed to bridge the gap between physical and virtual assets for mainstream consumers .”
The Voyager bankruptcy will be closely watched and likely precedential in the marketplace , Gayda and Matott add . “ How will customer assets be treated ? The preliminary view seems to be customer crypto that is held in omnibus accounts and not segregated would likely be “ estate property ” ( i . e ., property of the bankrupt entity ), leaving those customers with a shortfall ,” Gayda says . “ Different cases could have disparate results , depending on the underlying loan or customer custody agreements . On a macro scale , it will be interesting to see if this is simply contagion related to a specific collapse working through certain industry players , and if it can be contained , or if this is an indictment of the broader crypto marketplace . We will continue to monitor the situation closely and report on significant updates .” ¤ www . TurnaroundsWorkouts . com