Ways In Which Bankruptcy Law In India Affects The Digital Assets

Bankruptcy Law

During the recent years, a large number of digital platforms have launched the option of initial coin offerings or the ICO’s that are mainly studied and reviewed from the perspective of the security laws. However, there are several questions that are to be answered. What is going to happen when a debtor with tokens becomes insolvent and is put through the proceedings of insolvency?  How the tokens are made available to the creditors of the debtors?  How to ensure that the bankruptcy stay is going to be preserved and how to enforce the rules against the fraudulent activities?

Understanding the basics

When it comes to the bankruptcy laws in India, the trustee or any other entity heading the administration of the bankruptcy estate must find out the assets that are available to the creditors according to the property and the contract law during the initial proceedings against the debtor. However, when those assets include tokens, the process is going to be far more complicated.

The first hindrance is that the owners of the token can only enjoy the accessibility with the help of a digital key. Secondly, the debtor may have possessed the tokens under another name that is pretty hard to trace. However, both the issues make it comparatively easy for the debtor to hide those tokens away from the prying eyes of the creditor. However, it is equally important to know the consequences that may occur when the debtor’s ownership comes to the limelight or when the IP discovers them? How are the tokens going to be available to the creditors?  Consulting the bankruptcy law lawyer may reveal some of the answers to the queries.

Following the proceedings

When the proceedings of insolvency begins it deprives the debtor of the assets and the IP takes control of the situation. On the other hand, when the debtors transfer some of these assets, a majority of these transactions is considered invalid legally or not effective under the post-commencement of the avoidance rules. All this implies that the IP has the right to tell the debtor to transfer those assets through blockchain although the IP may not take note of this transaction again. However, with knowledge of the transaction, it is not going to be easy to alter the transactions as the blockchain transactions cannot be technically changed or reversed. The IP may apply the rule for covering situations when the transferred items cease to exist any longer. On the other hand, when the transaction involves anything else instead of money such as tokens, money may not be sufficient as the tokens for house or car related to a specific amount, but they also include the right to vote and to be paid a share of the profits. Moreover, the tokens can always appreciate in value.

Role of cryptocurrencies in bankruptcy

The part of the cryptocurrencies in bankruptcy is still to be ascertained properly as the consumer bankruptcy lawyers dealing with these cases need to resolve millions of queries when the primary question is whether the digital assets are actually matter of the court. Quite naturally, the bankruptcy proceedings become extremely difficult to handle due to lack of consensus related to the nature of cryptocurrency. For achieving consistency towards the proceedings, comprehensive tasks are to be handled. For instance, how the cryptocurrencies are to be segmented and treated, the process of identification of the debtors, and how the funds can be seized for distributing them to the claimants. For now, it is hard to get these queries replied through the common procedures of the bankruptcy law, but the way in which some of the cases have been dealt can deliver valuable insights.

Author Bio: Amy Jones has been serving as an experienced legal expert in Ahlawat & Associates, She is a passionate writer and always on the lookout for opportunities for sharing her knowledge with legal community. Follow her company on various social media networks like: Twitter and LinkedIn.

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