Presentation from Tom Braegelmann at the IBREA Meetup Blockcahin for Real Estate in Berlin from 11 January 2018

1. When Blockchains meet Bankruptcy
‐ Digital Assets in Insolvency

2. Purpose / Ideals of Bankruptcy / Insolvency Law
− No race to the courthouse
− Equal treatment of creditors
− Preserving value / assets
− Preserving employees
− Reorganization
− Fresh start
− Discharge
Not: Punishment of debtor.
Economic failiure is not itself a crime, only a learning experience
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3. Bankruptcy vs. Blockchains I
− Challenge: Application of national, fragmented insolvency law
to transnational crypto-assets issues
− Obligation to file for bankruptcy, how would that work for a
DAO or another crypto fund or ICO etc?
− Automatic Stay – automatically violated?
− Ipso Facto Clauses
− How do you “find” digital assets?
− Specifically, may an insolvency administrator sell off found
Bitcoins?
− Are there regulatory and AML issues for trustees and
insolvency administrators?
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4. Bankruptcy vs. Blockchains II
− If smart contracts are "immutable and" unstoppable ", what
about the general ban on payments while insolvent, e.g.
according to sec. 64 GmbhG and the like ?
− What about avoidance actions / preference law suits?
− How can loss of value be avoided if a smart contract does not
fit anymore but is immutable and unstoppable? Digital Ruins?
− Are smart contracts programmed flexibly enough to cope with
new economic situations?
− Digitization of EU Company law via blockchains: pliable enough
for restructuring scenario? Encumbrance/Realization of assets?
− Could this also be used by insolvency administrators? E. g. keep
the creditor register on a blockchain? Why not?
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5. Outlook: Restructuring/Insolvency Law needs to be considered
uropean Parliament resolution of 26 May 2016 on virtual currencies (2016/2007(INI)) in which the EP:
otes that DLT’s potential to accelerate, decentralise, automate and standardise data-driven processes at
lower cost has the potential to alter fundamentally the way in which assets are transferred and records
are kept, with implications for both the private and the public sector, the latter being concerned in three
dimensions: as a service provider, as a supervisor and as a legislator;
oints out that clearing, settlement and other post-trade management processes currently cost the global
financial industry well in excess of EUR 50 billion per year, and that this and bank reconciliation processes are
areas where the use of DLT might turn out to be transformational in terms of efficiency, speed, and
resilience, but would also raise new regulatory challenges;
ighlights the fact that, in this regard, several initiatives have been put in place by private sector actors, and
invites competent authorities, at both European and national level, to monitor such initiatives;
urther notes that DLT could be used to increase data sharing, transparency and trust not only between
government and citizens, but also between private sector actors and clients;
ecognises the still unfolding potential of DLT well beyond the financial sector, including crypto-equity
crowdfunding, dispute mediation services, in particular in the financial and juridical sectors, and the
potential of smart contracts combined with digital signatures, applications allowing for heightened data
security and synergies with the development of the Internet of Things;
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6. Outlook: Restructuring/Insolvency Law needs to be considered
uropean Parliament resolution of 26 May 2016 on virtual currencies (2016/2007(INI)) in which the EP:
otes that DLT’s potential to accelerate, decentralise, automate and standardise data-driven processes at
lower cost has the potential to alter fundamentally the way in which assets are transferred and records
are kept, with implications for both the private and the public sector, the latter being concerned in three
dimensions: as a service provider, as a supervisor and as a legislator;
oints out that clearing, settlement and other post-trade management processes currently cost the global
financial industry well in excess of EUR 50 billion per year, and that this and bank reconciliation processes are
areas where the use of DLT might turn out to be transformational in terms of efficiency, speed, and
resilience, but would also raise new regulatory challenges;
ighlights the fact that, in this regard, several initiatives have been put in place by private sector actors, and
invites competent authorities, at both European and national level, to monitor such initiatives;
urther notes that DLT could be used to increase data sharing, transparency and trust not only between
government and citizens, but also between private sector actors and clients;
ecognises the still unfolding potential of DLT well beyond the financial sector, including crypto-equity
crowdfunding, dispute mediation services, in particular in the financial and juridical sectors, and the
potential of smart contracts combined with digital signatures, applications allowing for heightened data
security and synergies with the development of the Internet of Things;
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