The protection of the owners of cryptocurrencies, in particular bitcoin: selected aspects of Swiss financial market and insolvency law

Abstract

Cryptocurrencies, such as bitcoin, ether or many others, relying on a distributed blockchain system (based on Distributed Ledger Technology, DLT), constitute an important and ever-growing market. The circulation of bitcoin alone currently has an estimated value of USD 115 billion. By way of comparison, the cash in circulation in Switzerland – not to be confused with the monetary aggregates M1, M2 and M3 which are much larger – totals CHF 84.5 billion. EY Switzerland announced that from January 2017 its clients could pay for their audit and advisory services in bitcoin; the town of Zug made a similar announcement recently. Numerous legal questions are raised in relation to the protection of individuals who have acquired cryptocurrency wallets or store them online. The aim of this chapter is to determine the existing protection for cryptocurrency holders (in particular for bitcoin, but in principle the reasoning can be transposed to any type of cryptocurrency based on identical technology) if a key storage supplier goes bankrupt. First, the analysis will focus on the issue of whether a positive cryptocurrency balance constitutes a thing and whether the activity of keeping cryptocurrency wallets is subject to authorisation by the Swiss Financial Market Supervisory Authority (FINMA); the answer to this question will determine the scope of protection for the claimant in insolvency law.