Are Crypto Assets Property in Insolvency? Understanding the 420% Surge in Cases 0 Comments / Insolvency / By Viv1 The rapid rise of cryptocurrency and digital assets has changed the financial landscape, and now it is reshaping insolvency and bankruptcy too. Over the past five years, the number of insolvency cases involving crypto assets in the UK has grown by an astonishing 420% , according to the Insolvency Service. In response, the Service recently appointed its first dedicated crypto asset specialist to trace and recover digital assets in insolvency proceedings. This surge reflects a new challenge for insolvency practitioners, regulators and company directors alike. As more businesses and individuals hold value in cryptocurrency, a pressing question arises: are crypto assets considered “ property ” in insolvency? Two landmark UK cases, AA v Persons Unknown (2019) and Ion Science Ltd v Persons Unknown (2020) , have helped establish the legal framework for answering that question. In this article, we explore how the courts have approached crypto assets, what these rulings mean in practice, and how insolvency professionals such as those at Simple Liquidation are adapting to this evolving area. The rise of crypto in insolvency cases Cryptocurrency ’ s popularity has exploded over the last decade. From Bitcoin and Ethereum to stablecoins and tokenised assets, digital currencies have moved from speculative investments to mainstream business tools. Many UK companies now accept crypto payments, hold tokens as investments or use blockchain-based contracts. When a company enters insolvency, the appointed liquidator must identify, recover and distribute all assets belonging to the company, including digital ones. Yet crypto presents unique challenges: It is decentralised, existing outside traditional banking systems. Ownership can be difficult to prove, as holdings are tied to private keys rather than names. Values fluctuate dramatically, complicating asset valuations. Transfers can occur instantly and anonymously across borders. As a result, insolvency practitioners increasingly require specialist knowledge and forensic tools to trace and recover crypto holdings. The Insolvency Service ’ s creation of a dedicated crypto-asset role demonstrates just how important this area has become. Are crypto assets “ property ” ? Under UK law, whether something counts as “ property ” is crucial. If crypto assets are legally defined as property, they can be frozen, recovered and distributed by insolvency practitioners just like cash, shares or real estate. If not, they could sit outside the reach of creditors. Historically, English common law recognised two categories of property: 1. Things in possession – tangible items you can physically hold. 2. Things in action – intangible rights, such as debts or contractual claims. Digital assets do not fit neatly into either category. They are intangible, but unlike traditional “ things in action ” , they do not represent a legal right enforceable against another person. For years, this left a grey area in insolvency and enforcement law. That changed in 2019 with the High Court ’ s decision in AA v Persons Unknown The landmark case: AA v Persons Unknown (2019) This case involved hackers who had demanded a Bitcoin ransom from a company. The insurer, AA, paid the ransom and then sought to recover the funds through legal action. The key issue for the court was whether Bitcoin could be considered “ property ” under English law, allowing an injunction to be issued against the hackers ’ wallets. Mr Justice Bryan ruled that cryptocurrency does qualify as property . He relied on the UK Jurisdiction Taskforce ’ s Legal Statement on Cryptoassets and Smart Contracts (2019) , which had concluded that crypto assets possess the four classic characteristics of property: 1. Identifiable – they can be uniquely identified on the blockchain. 2. Assignable – they can be transferred from one owner to another. 3. Permanent – they exist independently of any specific document or person. 4. Valuable – they can hold measurable economic value. The judgment granted a proprietary injunction over the Bitcoin, marking the first time an English court formally recognised crypto assets as property. Ion Science Ltd v Persons Unknown (2020) This later case reinforced the principles established in AA v Persons Unknown and extended them further. Ion Science Ltd, a UK company, alleged it had been defrauded of approximately £250,000 worth of Bitcoin in a fraudulent investment scheme. The company sought to trace and freeze the assets. The court again accepted that cryptocurrencies are property and granted a proprietary injunction and a Bankers Trust order , enabling the claimant to compel exchanges to reveal information about the wallet holders. The case also established two further important precedents: That England and Wales is an appropriate jurisdiction for such orders even when crypto wallets or exchanges are located overseas, provided the victim is based here. That courts are willing to act quickly to preserve crypto assets before they can be transferred or hidden. Together, these rulings created a robust legal foundation for treating crypto as property capable of being frozen, recovered and distributed in insolvency cases. Implications for insolvency practitioners These judgments have transformed how insolvency practitioners approach digital assets. If crypto is property, it must be included in the statement of affairs, investigated and, where possible, realised for the benefit of creditors. In practice, that means: 1. Identifying crypto holdings Practitioners must review company records, exchange accounts and blockchain transactions to identify wallets and tokens held by the company. 2. Securing private keys and access Without private keys, crypto assets cannot be moved or recovered. Practitioners must work with directors and forensic specialists to secure this information promptly. 3. Engaging forensic blockchain experts Tracing transactions across decentralised ledgers often requires specialist software and expertise to link wallet addresses to identifiable individuals or entities. 4. Working with exchanges and law enforcement Where assets have been moved, cooperation with crypto exchanges or international agencies may be needed to freeze and retrieve funds. 5. Valuation and conversion Crypto assets are volatile. Insolvency practitioners must decide when and how to convert them into fiat currency for equitable distribution to creditors. The Insolvency Service ’ s decision to appoint a crypto specialist demonstrates how mainstream these considerations have become. It is no longer unusual for companies in liquidation to have crypto wallets or blockchain-based investments that need to be managed as part of the insolvency estate. What this means for company directors For directors, the growing complexity of insolvency means that responsibilities have expanded. If your company holds crypto assets, you are required to: Disclose them fully to the liquidator or administrator. Safeguard private keys and passwords until they can be transferred. Avoid transferring or hiding assets once insolvency is suspected, as this may amount to misconduct or a breach of fiduciary duty. Directors should treat digital assets exactly like any other form of company property. Failing to do so could lead to allegations of wrongful trading, misfeasance or even criminal conduct. If you are unsure how to handle crypto assets during financial distress, seeking professional advice from a licensed insolvency practitioner is essential. How Simple Liquidation can help At Simple Liquidation , we understand that the world of business finance is changing. Our team is experienced in managing both traditional and modern forms of company property, including digital assets. Our Insolvency Practitioners, Jamie Playford FABRP MIPA and Alex Dunton MABRP , are licensed by the Institute of Chartered Accountants in England and Wales (ICAEW) and authorised by the Insolvency Practitioners Association (IPA) . With over 30 years of combined experience, they have handled hundreds of solvent and insolvent cases across multiple sectors. We are not intermediaries or brokers. We provide direct, professional insolvency advice and a quick, compliant route to liquidation for directors who want to act responsibly and protect their position. Whether your company ’ s assets include cash, property, shares or cryptocurrency, our experts will guide you through the process from start to finish, ensuring full legal compliance and transparency. Final thoughts The question of whether crypto assets are property has now been largely settled. English courts have confirmed that they are. For insolvency practitioners, this means that digital currencies must be treated with the same care and rigour as any other asset. For directors, it means full disclosure and cooperation are vital. As the number of crypto-related insolvencies continues to rise, the field of insolvency is evolving fast. Regulation, technology and expertise must keep pace. The Insolvency Service ’ s new crypto asset specialist is just one sign of this transformation. If your company is facing financial difficulty, whether or not crypto assets are involved, Simple Liquidation is here to help. We can advise you on your duties, explain your options clearly and handle every step of the process with professionalism and integrity. Contact Simple Liquidation today for a confidential, no-obligation consultation about your situation. 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