Crypto exchanges and insolvency - An overview of the experts from Kryptoanwalt.de

The insolvency of a crypto exchange can cause significant uncertainties and concerns for investors. Given the volatile nature of the market, it is crucial to understand the impact of a company's insolvency on access to its own cryptocurrencies. This article covers the important aspects that investors should be aware of in such a situation.

Effects of insolvency on access to cryptocurrencies‍

Ownership of coins‍

If you hold your cryptocurrencies on a centralized crypto exchange, you usually don't own the actual coins, but only a claim to them within your account. This means that in the event of an exchange insolvency, access to your coins may be lost.

With decentralized platforms or wallets, on the other hand, users have the private keys to their coins. This form of storage offers greater security, as the coins are not stored on a central platform.

Liquidation and insolvency proceedings

In the event of insolvency, an insolvency administrator is appointed to manage the assets of the stock exchange. Access to digital currencies could be restricted during insolvency proceedings.

Insolvency proceedings often result in appropriate legal formal checks, during which existing customer claims for coins held in the P2P (peer-to-peer) model are reviewed.

Customers' rights

In many countries, there are certain legal regulations in insolvency proceedings. As part of the process, customers could try to assert their claims on the cryptocurrencies they hold. However, the success of such claims depends on the respective conditions and laws of the country.