Blockchain Insolvency & Windup Services
Liquidation and insolvency services are required for those who are unable to repay their debts and are willing to wind up their business and distribute the remaining assets as the final settlement of payments to all their creditors. The process of liquidation basically means that the assets of the company or business will be liquidated or sold off and the returns from the sale distributed among the creditors. The point when a company declares that it is unable to repay its debts is when it is called insolvent or bankrupt. This is when the possibility for liquidation arises. Hence, the processes of liquidation and insolvency are considered inter-related.
Like any other industry, the crypto and blockchain industry can also suffer business failures and businesses or companies operating in this industry may be required to declare bankruptcy and their assets may have to be liquidated. These may arise due to a failure in creating the token, hurdles in operation, or even due to losses incurred as a part of normal business activities. The businesses in the blockchain and cryptocurrency industry face a challenge in entering liquidation proceedings as there is a lack of adequate experts who possess the expertise required to deal with liquidation proceedings for these businesses. Empire Global Partners in association with Defied Bank is working to bring global expertise for liquidation and insolvency services in the blockchain industry.
How do liquidation proceedings occur?
You can obtain a Cryptocurrency Exchange License in Kazakhstan after registering as a Domestic TOO (Ltd. Company) which then gets subsequent permission as a Financial Service Provider from the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (‘Agency’) and Ministry of Economy. The license allows the business to accept customers from other jurisdictions.
Kazakhstan Cryptocurrency Exchange License enables businesses to perform a wide variety of activities including e-wallet services, payment services, foreign exchange, and securities dealing, financial consulting, depository agent activities, merchant services, issuance of debit cards (in specific cases), hosting of currency and crypto trading platforms and software development. Kazakhstan’s Cryptocurrency Exchange License is unique because it is the only license that permits such a wide range of activities.
The basis of the license is a permissive regime based on express written permission provided by the regulatory authority. While the registration of financial services company is made with the Ministry of Economy, the Agency is entrusted with functions such as regulation of the financial services, money exchange services, investment funds, and insurance companies under the Decree of the President of the Republic of Kazakhstan dated November 11, 2019, No. 203 “On further improvement of the public administration system of the Republic of Kazakhstan”. Applicant seeks the permission of the Agency along with the registration of the Ministry of Economy for operating in the financial services sector like financial services.
What services are Empire Global Partners and Defied Bank providing?
Empire Global Partners and Defied Bank have found that there is a lack of service providers who can provide guidance for the liquidation and winding up process for blockchain-based businesses. The needs of these businesses vary because unlike normal companies where the key creditors are banks, suppliers of raw materials, and debenture holders, the creditors for blockchain and cryptocurrency companies are normally the token holders who have paid in advance for purchasing a token.
In such a situation, these blockchain-based businesses need to come up with a specialized plan to deal with the customers who had paid money for the tokens but now cannot be provided with tokens because of a failure of the project. There may also be investors who gave out loans to blockchain or cryptocurrency-linked companies and then are unable to pay them back.
In such a situation, this new arm of Empire Global Partners and Defied Bank, both of which have experience in serving cryptocurrency linked businesses worldwide will provide the following services:
1. Guidance and consultancy on liquidation options available for blockchain linked businesses
2. Acting as a liquidator for blockchain linked businesses
3. Preparation of court submissions asking permission for liquidation proceedings
4. Collection and processing of claims before the liquidation of blockchain linked businesses
5. Settlement of claims from creditors prior to voluntary liquidation
6. Consultancy for token issuers and exchanges in complying with global bankruptcy proceedings.
What are the options for blockchain-based businesses as a part of liquidation?
The blockchain-based businesses can select three options for the liquidation process.
As the first option, they can choose normal voluntary insolvency proceedings. In these proceedings, the creditors may object and the assets of the company may be sold off to pay off any dues. The court may stop such proceedings if there are any criminal complaints against the company.
The second option is to move for voluntary liquidation and also call for submission of claims from creditors and token customers. The customers and creditors can then be made an offer for settlement and they can be paid off on signing a release that they will not raise any further claims.
The third option is providing an option for the transmutation of tokens. Under this process, the token seller may agree to provide an alternative token in exchange for the tokens distributed or planned to be distributed. The token purchasers will then have to sign a release against any future claims after receiving the alternative token.
Who can seek these services?
The services provided by Empire Global and Defied Bank can be useful for blockchain-linked businesses and Decentralized Autonomous Organizations (DAO) that could not provide a token, or where the token failed to take off. Additionally, any blockchain-linked business which is thinking that their token issuance process may fail may also commence these proceedings to settle potential claims at the earliest.