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The Need for More (And Better) Private Law in Digital Asset Markets

By Christopher K. Odinet, Josephine R. Witte Professor of Law, University of Iowa; MacCormick Fellow (2023), University of Edinburgh.

For years now, the law around digital asset transactions has been very much up for debate, with some jurisdictions being more active than others in setting the legal parameters around these novel arrangements.  For example, the Singapore International Commercial Court ruled in B2C2 Ltd v Quoine Pte Ltd (2019)[1] that crypto assets can be viewed as property, similar to the English court’s decision in AA v. Persons Unknown involving Bitcoin[2] and the New Zealand High Court’s ruling in Ruscoe and Moore v. Cryptopia Limited (In Liquidation) which held that cryptocurrencies constituted “a species of intangible personal property.”[3] In contrast, in the United States, the law surrounding digital assets has been slow to take shape. Both federal and state courts have approached this area timidly and amendments to statutory commercial laws have started to be considered only recently—specifically, the 2022 amendments to the Uniform Commercial Code.[4]

But, as written elsewhere,[5] the stagnation enveloping this area of the law in the United States appears to be at an end. Following the pattern seen in other jurisdictions, U.S. bankruptcy courts find themselves on the frontlines, confronting a multitude of private law matters stemming from novel transactions involving digital assets. FTX, the world’s third-largest cryptocurrency exchange, declared bankruptcy on November 14, 2022. In July 2022, the crypto lending platform Celsius also sought bankruptcy protection. Additional crypto company insolvencies involving Three Arrow Capital and Voyager Holdings also occurred that summer.

These recent bankruptcies have highlighted the complexities debtors encounter when trying to distribute and optimize the worth of crypto assets, as well as make more fundamental determinations relative to the rights and priorities of various parties.[6] Yet, these cases venture beyond the matters typically adjudicated in insolvency proceedings. Rather, bankruptcy judges are being forced to address fundamental private law questions about digital assets that are presently unresolved in the U.S. One key issue is whether crypto assets are personal property and, if so, what type: a “thing in action,” a “thing in possession,” or a novel tertium genus. A similarly cardinal matter, often at the heart of these bankruptcy proceedings, is whether holding a cryptocurrency in a user’s account is characterized as a personal versus a proprietary claim against the intermediary maintaining it.

Scholars like Professor Adam Levitin have explored this uncertainty, especially for crypto exchange companies.[7] The crypto lending platform Celsius’ bankruptcy case provided insight into asset custody; the court deemed the crypto assets in that case to be property of the bankruptcy estate, disappointing customer-creditors. However, the US has yet to decide on custody issues for exchange companies, which are themselves crucial intermediaries in the crypto market. The role of terms of service also comes into play, especially when they’re unclear, contradictory, or have changed over time. So far, litigation involving crypto exchange customers and crypto intermediary companies has largely hinged on the contents of the terms of service, thereby suggesting that freedom of contract is likely to play a significant role in shaping these issues.

Resolving these fundamental queries surrounding crypto assets holds substantial public interest. Resolution would establish legal clarity, bringing certainty and predictability to the crypto market. Also, answers to these questions would guide regulators and lawmakers in formulating appropriate laws and approaches for regulating and overseeing the crypto market.

Yet, it is uncertain as to how far bankruptcy courts can go in this respect. The decisions of these courts may only partially address these issues or address them in a way that cannot be usefully extrapolated to the larger market. Moreover, the parties may often settle the issues inter se such that the disputes do not produce judicial precedent or authority that can be used in future cases.

All of this highlights a central issue (and one that my co-author Andrea Tosato and I will be giving much fuller treatment in future work): the importance of a better, more developed private law when it comes to digital asset transactions.

Digital commerce has brought about significant transformations across various societal domains. This evolution encompasses a wide range of innovations, from converting complex financial assets into tokens, to the expansion of digital securities trading and settlement, to the proliferation of transactions involving cryptocurrencies, stablecoins, and NFTs. These advancements have captivated the attention of numerous stakeholders, including lawmakers, academics, businesses, and consumers, sparking both enthusiasm and apprehension. Indeed, the various crypto bankruptcies mentioned above are evidence of the intense entrepreneurialism and consumer and investor attention that these technologies have garnered. While this transformative landscape may promise enhanced social welfare, productivity, efficiency, and inclusion, it also faces challenges such as speculation and fraud.

More importantly for our purposes, these technological leaps forward have raised fundamental questions about the existing legal framework that underpins commercial transactions. The primary challenge lies in determining the adequacy of current rules and standards for the digital commerce landscape and assessing the need for new ones. Amid these deliberations, a significant and underappreciated development has emerged: private law, historically a cornerstone of the legal foundation for commercial transactions, has been relegated to a secondary role. Furthermore, when private law does come into consideration, it is often misunderstood and misapplied.

Primarily, the response of lawmakers, regulators, lawyers, and scholars to the crypto market and digital asset economy more broadly has been centered around financial regulation.[8] This approach centers on determining what parties are allowed or prohibited from doing when it comes to digital asset transactions and how they can do it. But, this approach often overlooks the private law aspects of these transactions, including the relationships, rights, obligations, and property rights of the parties involved. Additionally, even when private law is considered in the context of developing the legal framework for digital asset transactions, attention is largely concentrated on the contractual arrangements between parties—usually focusing on byzantine (and often poorly drafted) terms of service. The broader perspective of property law is often overlooked.

In our forthcoming project, we emphasize two key points. The first is the need for a more balanced and synergistic integration of private law and financial regulation in establishing a coherent legal framework for digital asset commerce. This framework cannot solely rely on either aspect but requires an equilibrium between the two, where private law lays the groundwork for public law regulation.

The second key point is the recognition that while contracts play a pivotal role in the formation and analysis of digital commerce, property law is equally essential, as it encompasses enforceable proprietary rights that are intrinsic to digital commerce. Contracts can facilitate the transfer of these rights, but they cannot unilaterally reshape or create them.

To make these points concrete, our project delves into significant areas of digital commerce, such as stablecoins, tokenization of real estate, and tokenized debt markets. We contend that the prevailing approach—where private law is often overlooked or considered superficially—leads to flawed legislative responses, erroneous judicial decisions, and inefficient transactional structures. Moreover, neglecting private law could lead to an imbalanced legal framework that exacerbates inequality, misallocates resources, distorts incentives, and impedes innovation. By embracing a thorough private law analysis, our project seeks to provide lawmakers with valuable insights for formulating effective laws for digital commerce and to grant market participants legal clarity regarding contractual and property rights. Ultimately, the aim is to create a comprehensive and balanced legal framework that fosters innovation, efficiency, and fairness in the realm of digital commerce.

[1] B2C2 Ltd v. Quoine Pte Ltd [2019] SGHC(I) 03, aff’d Quoine Pte Ltd v. B2C2 Ltd [2020] SGCA(I) 02,
[2] AA v. Persons Unknown & Ors, Re Bitcoin, EWHC 3556 (Comm) (2019) (U.K.).,
[3] Ruscoe & Moore v. Cryptopia Ltd. (in Liquidation) [2020] N.Z.H.C. 728 (N.Z.),—ruscoe-and-moore-v-cryptopia-limited-in-liquidation.pdf. There has also been significant scholarly writing on the matter. See David Fox, Cryptocurrencies in the Common Law of Property, in David Fox and Sarah Green (eds) Cryptocurrencies in Public and Private Law 139 (David Fox & Sarah Greed eds., 2019); James G. Allen, Property in Digital Coins, 8 European Prop. L.J. 64 (2019). See also UK Jurisdiction Taskforce, Legal Statement on Cryptoassets and Smart Contracts 2019).
[4] See Juliet M. Moringiello, False Categories in Commercial Law: The (Ir)relevance of (in)tangibility, 35 Fla. St. U. L. Rev. 119, 126 (2007); Joshua A.T. Fairfield, Bitproperty, 88 S. Cal. L. Rev. 805 (2015); Christopher K. Odinet, Bitproperty and Commercial Credit, 94 Wash. U.L. Rev. 649 (2017). See generally UCC § 12-102. See Christopher K. Odinet & Andrea Tosato, Floating Liens and Crypto-in-Commerce, Indiana L.J. (forthcoming 2023),
[5] Diane Lourdres Dick & Christopher K. Odinet, The Public and the Private of the FTX Bankruptcy, Harvard Bankruptcy Roundtable (Jan. 31, 2023),
[6] Diane Lourdres Dick & Christopher K. Odinet, The Questionable Virtues of Chapter 11 in the FTX Bankruptcy, CLS Blue Sky Blog (Dec. 7, 2022),
[7] Adam J. Levitin, Not Your Keys, Not Your Coins: Unpriced Credit Risk in Cryptocurrency, 101 Tex. L. Rev. 877 (2023).
[8] See, e.g., Jason Brett, Congress Has Introduced 50 Digital Asset Bills Impacting Regulation, Blockchain, And CBDC Policy, Forbes (May 19, 2022),

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