Under the laws of Japan, owners of “property” or “things” being held by a bankrupt entity are entitled to get that property directly back, without entering into the bankruptcy system and sharing that property with creditors. This is called the Right of Segregation, meaning that the property should not be mixed with the bankruptcy estate.
In the MtGox bankruptcy the bitcoins were not returned to the owners as property should be, so in 2015 there was a lawsuit to get the bitcoins given back to the depositors. The court refused on the grounds that it claimed that bitcoins are not tangible therefore could not be ownable and considered as property. This is the reason why our bitcoins are trapped in this bankruptcy.
The Financial Services Authority in Japan, a government organisation, has since classified bitcoins as property. This is certainly very interesting and we’re looking further into this at the moment.
This seems like a serious flaw in the legal system. For example, any company or person in Japan holding the keys to certain assets such as investments, could surely push themselves into bankruptcy and pocket any appreciation in value – effectively taking over the investment benefits for themselves.
The Japanese government has already amended some laws to modernise the system to take account of cryptocurrencies in the wake of MtGox. They did it possibly to demonstrate that the MtGox disaster was being addressed (though they failed to address the most important issue, and there will be an article about that at some point).
It’s expected that more laws will be updated too, such as the Banking Act. Perhaps there could be scope for updating laws to allow digital assets such as bitcoins to be ownable property. That could be one possible route for ending the bankruptcy without giving the bitcoins to the shareholders.