A Brave New Crypto World

Blockchain technology has provided us with new creative opportunities. From alternative democratic and creative funding models to revolutionary information storage/maintenance solutions and applications, the list is almost endless. 2016 and 2017 saw the emergence and popularisation of blockchain technology’s ability to create Crypto Assets1 through the Crypto Asset issuance process known as “Initial Coin Offerings” (“ICOs”), though this is by no means the only way to create Crypto Assets using blockchain technology. The Cayman Islands is one of the leading ICO jurisdictions based on funding volume given that the availability of high quality service providers, the predictable legal system and the stable yet progressive political climate all complement and encourage the development of innovative business. Nevertheless, many issuers of and investors in Crypto Assets and many advisors have exclusively focused on legal and regulatory compliance when creating and issuing Crypto Assets. This front-ended focus has led many to overlook the potential challenges that may arise when things don’t go according to plan. This could be of particular relevance if Cayman Islands issuers of tokens and Cayman Islands custodians of Crypto Assets become insolvent since, considering their day-to-day business and operational needs, they may hold a substantial amount of their value in Crypto Assets (each such asset having differing degrees of liquidity and worth). This article aims to: (i) highlight some of the technological hurdles that liquidators may face when confronting the technology that underpins this new asset class; and (ii) outline some of the options available to Cayman Islands liquidators when liquidating a Cayman Islands company2 that holds, or held, Crypto Assets.

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