How cryptocurrencies are viewed by courts can be determinative when seeking coverage for a cryptocurrency-related loss, and whether cryptocurrency is “money,” “securities,” or “property” has been the subject of heavy debate.
In our previous blog post, we explored how your current D&O and/or cyber insurance policies may provide coverage for crypto-related losses. In this article, we discuss whether and how coverage may also exist for certain losses under typical property and/or specie insurance policies.
Is cryptocurrency “property”?
When determining whether your loss of or inability to access your cryptocurrency is covered under your property and/or specie policy, the first question to ask is whether cryptocurrency constitutes covered “property.”
The Internal Revenue Service (“IRS”) has provided some guidance. In March 2014, the IRS declared that “virtual currency”, such as Bitcoin and other cryptocurrency, will be taxed as “property” and not currency. See IRS Notice 2014-21, Guidance on Virtual Currency (March 25, 2014); see also IRS Has Begun Sending Letters to Virtual Currency, Internal Revenue Serv. (July 26, 2019), (“IRS Notice 2014-21 … states that virtual currency is property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions.”).