Commodity or Currency: Cryptocurrency Valuation in Bankruptcy and the Trustee’s Recovery Powers

Cryptocurrencies have rapidly grown to global prominence over the past decade, inspiring new forms of investments and transactions among entrepreneurs and business novices alike. The rise of cryptocurrencies has naturally led to a rise in businesses and individuals in possession of cryptocurrency assets declaring bankruptcies. The cryptocurrency assets then become part of the bank-ruptcy estate. As a result, bankruptcy courts are struggling with whether cryptocurrencies are currencies or commodities, a classification that has broad implications for the recovery and valuation of cryptocurrency assets in the event of fraudulent and preferential transfers. This Note argues that bankruptcy courts should treat cryptocurrencies like commodities because this largely eliminates valuation problems when the trustee can recover the cryptocurrency asset itself. A commodity classification, however, will not entirely prevent valuation problems in cases of fraudulent and preferential transfers where physical recovery is not possible. This Note further argues that in cases where bankruptcy courts cannot recover the asset and must therefore recover its value, courts should value the cryptocurrency asset as of the date of the bankruptcy petition.