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Abstract

Difficulties with defining cryptocurrency have plagued federal agencies and courts since crypto’s creation. With the emergence of “crypto winter” in 2022 that saw many crypto-related ventures fail, bankruptcy courts have been challenged to address numerous novel legal issues surrounding crypto-assets. When looking to the Bankruptcy Code fails to provide answers, courts must look to definitions, agency regulations, and an analysis of cryptocurrency’s position in the market to determine its classification. This can quickly become muddled with the voluminous and seemingly conflicting sources that exist. One such issue emerges when courts attempt to determine how to classify a particular cryptocurrency: is it a commodity or currency? The answer to this question impacts the valuation within a bankruptcy estate and can have a significant effect on the amount a creditor can recover. This Comment analyzes how bankruptcy courts should define tethered cryptoassets, often referred to as stablecoins; it concludes that a commodity definition is more aligned with the function and characteristics of reserve-based stablecoins.

Further, the valuation of crypto-assets is crucial to the stability and feasibility of the proposed reorganization plan. The volatility of stablecoins exemplifies a growing public concern about the practicality of cryptocurrency company reorganization plans. This Comment analyzes the standard of deference courts typically give when approving reorganization plans and recommends the implementation of a higher standard of review for cryptocurrency-related reorganization plans.

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