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ARTICLE · 28 MARCH 2023

The Crypto Conundrum: Difficulties In Valuing Cryptocurrency Assets Held In Exchange Custody: Part Two

Mayer Brown
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Part One of this two-part article reviewed custodially held crypto assets as part of the bankruptcy estate. This installment discusses intrinsic value as a proper valuation...

United StatesTechnology
Jon A. Schlotterbac
Jon A. Schlotterbac
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Mayer Brown LLP; Charlotte, N.C.1

Part One of this two-part article reviewed custodially held crypto assets as part of the bankruptcy estate. This installment discusses intrinsic value as a proper valuation method for crypto assets held in exchange custody, factors to consider when calculating the intrinsic value of custodially held crypto assets, and risk-mitigation approaches to preserve asset value.

Intrinsic Value as a Proper Valuation Method for Custodially Held Crypto Assets

When a record owner of crypto assets held in exchange custody files for bankruptcy, trustees and counsel must acknowledge the risk of an exchange bankruptcy during the pendency of the record-owner's bankruptcy case. As discussed in Part One, crypto assets held in exchange custody cannot be valued according to face value due to the risk an exchange bankruptcy's automatic stay will prevent the record-owner from exercising its directing interest over the assets.

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