Virtual Collateral 101: How To Take And Enforce Security Over Cryptocurrencies, Crypto-Assets And Central Bank Digital Currencies

In recent years, there has been a proliferation of lending secured by crypto-assets through online decentralized platforms. It is estimated that, during one month in 2021, more than US$122 billion in transaction volume occurred through such platforms.¹ This level of activity demands a close look at legal issues that arise when borrowing against cryptocurrencies and other virtual assets. Virtual collateral is not explicitly addressed in the personal property security law of Canadian common law provinces, as primarily set out in theirPersonal Property Securities Acts(collectively, the "PPSA").² Lenders and insolvency practitioners therefore face open questions when dealing with loans backed by cryptocurrencies or other virtual assets - most importantly, how should secured parties best protect their interest in this online collateral?