Enforcement and recovery of digital assets in insolvency proceedings

With the Insolvency Service reporting a 420% rise in cases involving digital assets over the past five years alone, insolvency practitioners and creditors must now consider digital assets as potentially significant components of any insolvent estate, requiring robust enforcement and recovery strategies. This briefing explores the increasing relevance of digital assets in insolvency proceedings, including their legal status, the challenges of enforcement and recovery, and key considerations for insolvency practitioners and creditors.

In this article, associate Billy Blackall discusses the growing prominence of digital assets in insolvency proceedings, the evolving legal framework recognising them as property, and the practical challenges insolvency practitioners face when tracing, securing and recovering these assets across decentralised and often cross-border environments.

Although there is no settled definition of ‘digital assets’, the term typically refers to items of value that exist in digital form and can be uniquely identified. Examples include cryptocurrencies (such as Bitcoin), non-fungible tokens (NFTs), stablecoins, and any other digital tokens representing ownership or rights. In the UK, according to the Financial Conduct Authority (FCA), over 7 million adults (approximately 10%) hold some form of digital asset, and this upward trend is forecast to continue.  

Prompted by the growing prevalence of digital assets, courts and policymakers have had to consider how this novel asset class fits within existing legal frameworks. The central question has been whether digital assets can be considered ‘property’ under English law (since they are neither ‘choses in action’ nor ‘choses in possession’ in the traditional sense) and are therefore capable of being traced and recovered.

In 2019, the UK Jurisdiction Taskforce (UKJT) published its landmark statement concluding that digital assets can, in principle, be treated as property. This approach has since been adopted by the English courts, such as in AA v Persons Unknown and others [2019] EWHC 3556 (Comm) and D’Aloia v Persons Unknown Category A and others [2022] EWHC 1723 (Ch). The UKJT’s 2024 insolvency statement further confirmed that digital assets fall within the definition of ‘property’ under the Insolvency Act 1986, meaning that digital assets can be treated as property within the context of insolvency proceedings.

Most recently, the Property (Digital Assets etc.) Bill, which was first introduced to Parliament in September 2024 following the Law Commission’s lengthy consultation process, had its third reading on 19 November 2025 and is expected to receive Royal Assent in the near future. This short but important Bill places the legal status of digital assets on a statutory footing, aiming to provide greater clarity whilst leaving the courts to refine practical applications for insolvency practitioners handling estates with digital assets.  

 Despite their increasing recognition as property, digital assets still present distinct challenges for enforcement and recovery within insolvency proceedings, driven by their operational and legal complexities. In practice, the main contributing factors include:   

1. Anonymity. Unlike traditional financial systems, identifying the holder of a digital asset can be difficult due to the decentralised and pseudonymous nature of transactions on distributed ledger technology (DLT) models, where assets can move rapidly across multiple wallets and exchanges. This raises practical issues around identifying holders, serving freezing orders or judgments, and enforcement so as to realise value for the insolvent estate. In an early effort to address these challenges, the English courts have permitted more creative methods of alternative service (such as via WhatsApp or text message), and have granted orders and judgments against “persons unknown” who are the anonymous perpetrators of digital asset fraud.
2. Jurisdiction. The borderless footprint of digital assets poses various jurisdictional difficulties, particularly where assets are distributed internationally or held with exchanges and other third parties. Whilst insolvency practitioners can seek injunctive or equitable relief, and courts can issue worldwide freezing orders, these measures may be of limited effectiveness where the holder absconds the court’s jurisdiction and places the assets beyond the reach of domestic enforcement. In those circumstances, successful recovery for the estate may hinge on cross-border cooperation, mutual recognition of foreign orders, or international frameworks such as the UNCITRAL Model Law on Cross-Border Insolvency.
3. Valuation and volatility. Even where digital assets can be traced and recovered, and any jurisdictional hurdles overcome, realising their value remains a separate challenge. Certain assets, such as newly-launched tokens and some NFTs, may lack a liquid market, complicating their valuation and conversion into monetary value. Other digital assets, including established cryptocurrencies, are traded on liquid markets but remain highly volatile. Bitcoin, for instance, lost over 30% of its value between October and November 2025. As a result, the value of digital assets may fluctuate significantly between the point of recovery and their actual realisation, affecting potential distributions to creditors in insolvency proceedings. 

With digital assets constituting a growing share of global financial markets, insolvency practitioners and creditors need to monitor this area carefully and develop effective enforcement strategies at an early stage. Prompt asset profiling and consideration of enforcement options, from selecting the appropriate forum to securing interim relief, are critical to preserving value and achieving meaningful recovery for any insolvent estate.

Where appropriate, this may require a multi-disciplinary team of lawyers, investigators and forensic accountants to gather clear and convincing evidence of the location and movement of digital assets, including through blockchain analysis. Even once traced, digital assets may be spread across jurisdictions, with practitioners needing to use adapted or novel strategies to preserve and enforce claims. Successfully addressing these technical and legal complexities is critical to maximising recovery and improving outcomes for creditors.