Bitcoin And Cryptocurrency Negotiability Is An Uncertain Landscape

Many mainstream businesses are beginning to accept Bitcoin and other virtual “currencies” as a form of payment. These businesses treat Bitcoin as a form of currency and assume that it is taken free of any adverse claims asserted by creditors of the transferor of the Bitcoin. But is it?  What if before the Bitcoin transfer, the transferor granted its lender a lien on the Bitcoin or on all “general intangibles” owned by the transferor (a fairly common occurrence). Will the transfer of the Bitcoin be free of such an encumbrance? Unfortunately, under the current laws of most states, the answer is likely “no.” The transferee is at risk of having to disgorge the Bitcoin if an adverse claim is asserted against it by a creditor of the transferor.