A paper recently published by the Law Faculty of the University of Oxford examines the legal risks of depositing cryptocurrency with custodians in the event of insolvency. The paper, featured in a June 1 blog-post by the faculty, also suggests ways that regulation and practice can help to mitigate this risk.
Cryptocurrencies were initially created as a way to be free from the interference of governments, banks and other intermediaries. However, the reality is that a large proportion of Bitcoin (BTC) and other cryptocurrencies is currently held through custodians such as exchanges, rather than by investors themselves.