Quantuma and Francis Wilks & Jones lead the call for insolvency administrators to be legally empowered to scrutinise Bitcoin transactions
Insolvency administrators seeking the recovery of assets must be legally empowered to scrutinise all data relating to Bitcoin transactions.
That’s the joint call from leading corporate recovery and business advisory firm Quantuma and law firm Francis Wilks & Jones in the wake of the continuing growth of cryptocurrencies as a worldwide payment system.
The UK and many other EU governments have already confirmed that they will seek to bring cryptocurrencies in line with anti-money laundering and counter terrorist financing legislation.
But Quantuma and Francis Wilks & Jones say extra legislation and court action may be needed to assist insolvency administrators to identify and liquidate digital currencies.
The comments come as the insolvency sector starts to wake up to the challenges of the so-called Blockchain, which is essentially a ledger which records all Bitcoin transactions.
Blockchain allows a user to securely send or receive money across the internet to someone they might not know and who might not have any real traceable identity, which in effect creates anonymous payments.
Chris Newell, a partner at Quantuma and a licensed insolvency practitioner, said: “The UK’s current legal doctrines are ill-equipped to handle the significant rise of this new digital currency in the context of insolvency.
“We would argue there are huge benefits in a mechanism allowing trustees of a bankruptcy estate or office holders to access data relating to any transactions involving cryptocurrency in order to ultimately recover assets.
“This may involve office holders having the ability to make requests to Bitcoin exchanges or being able to access the Blockchain to interrogate transactions.
“Such access would immediately remove a lot of the negativity surrounding digital currency in that it would become transparent to parties who had a right to investigate and query transactions.”
Christopher Ahearne, an associate at Francis Wilks & Jones, who are experts in insolvency law, said: “We expect there to be significant resistance to such a move, and it’s therefore likely that the costs to pursue and investigate these transactions will be high and potentially uneconomical.
“For the foreseeable future office holders may have to rely on the full ongoing co-operation and assistance of a director in order to identify and liquidate digital currency.
“This will not always be forthcoming and an office holder may need to rely on their current ‘toolkit’ which would include compelling a director to cooperate under the provisions of the Insolvency Act, and ultimately applying to Court if cooperation was not forthcoming.”
Newell of Quantuma added: “Governments have been slow to recognise the growing significance of cryptocurrency in financial transactions.
“Some coins such as Monero are designed to avoid tracking and the majority of exchanges where digital currency can be traded are registered outside the jurisdiction and have stringent privacy policies.
“These cryptocurrency features could be exploited by more unscrupulous individuals as a means of hiding assets, and we hope this possible criminal element will be addressed in the regulatory overhaul promised by UK and EU governments.”
But Ahearne of Francis Wilks & Jones warned: “Until such time as this new technology is brought within the scope of UK legislation, we as professionals may face some difficult issues which may involve court intervention and rulings.”
Ends (529 words)
Click the .pdf below to find out more:
For further information, please contact:
Marie Wadeson, Director of Marketing,
Quantuma LLP, High Holborn House, 52-54 High Holborn, London, WC1V 6RL
Tel: 07464 545678
Or Steve Dyson, ASAP PR – 01789 490786
Notes to Editors
- Quantuma LLP is a leading corporate restructuring, insolvency and business advisory firm delivering partner-led solutions to businesses and individuals facing financial distress with offices in London, Southampton, Marlow, Watford, Brighton, Birmingham, Bristol and Manchester.
- Francis Wilks & Jones is a niche law firm with extensive experience and expertise in insolvency, commercial litigation and services to the asset-based lending industry. With offices in both London and Cardiff, they are well-positioned to advise clients and IPs across the UK.