Crypto assets, custody and trust: What the Bermuda Court of Appeal’s decision in Re Bittrex Global means for clients

The Bermuda Court of Appeal’s recent decision in Re Bittrex Global (Bermuda) Ltd (in liquidation) [2026] CA (Bda) 1 Civ represents a significant development in the legal treatment of cryptoassets, particularly in the context of custody and insolvency. It is the Court’s first substantive consideration of Bermuda’s Digital Assets Business Act 2018 (DABA) and provides important clarification on how cryptoassets held by exchanges are to be treated when those exchanges become insolvent.

This decision matters because it addresses a central uncertainty in digital asset markets; whether cryptoassets held by exchanges form part of the exchange’s own property, or whether they remain the property of customers. The answer has profound consequences for investors, institutions and creditors, particularly in insolvency scenarios where competing claims arise.

More broadly, the case contributes to a growing international body of legal principle, recognising cryptoassets as a form of property capable of attracting proprietary rights and remedies, while refining how courts approach the role of intermediaries such as exchanges.

What did the Court of Appeal decide?

The central issue in Bittrex was whether digital assets held in the exchange’s “Standard Hosted Wallets” formed part of the company’s assets available for distribution in liquidation. The Court of Appeal upheld the first instance decision that they did not.

Although the Court stopped short of strictly categorising the relationship as a trust, it held that, in substance, the assets were held for the benefit of customers. Customers retained a proprietary interest in the cryptoassets, which fell outside of Bittrex’s insolvency and, therefore, could not be distributed to shareholders.

The Court’s reasoning was grounded in both the factual custody arrangements and the statutory framework under DABA. It emphasised that customers owned the assets both legally and beneficially prior to transfer, the assets were treated as customer property after transfer, and they were segregated from the exchange’s own assets in accordance with regulatory requirements.

Particular weight was given to sections 17 and 18 of DABA, which require digital asset businesses to safeguard and segregate client assets. The Court interpreted the concept of a “trust account” in a functional sense, reinforcing that assets held on behalf of customers are not beneficially owned by the exchange.

Why this decision matters beyond Bermuda

While the decision is grounded in Bermudan law, its significance extends well beyond the jurisdiction. Courts globally are grappling with similar issues, and Bittrex aligns with a broader judicial trend.

In ByBit Fintech Ltd v Ho Kai Xin & Ors [2023] SGHC 199, the Singapore High Court confirmed that cryptoassets constitute property capable of being characterised as “choses in action”, are capable of being held on trust and of attracting proprietary rights.

In the England and Wales high Court decision of D’Aloia v Persons Unknown & Others [2022] EWHC 1723 (Ch), the Court held that the exchanges which had received the assets were not liable as constructive trustees. They were treated as innocent intermediaries, lacking the requisite knowledge of the fraud. The decision therefore confirmed that while cryptoassets can be traced and protected through proprietary remedies, exchanges are not automatically subject to trustee liability merely by virtue of holding or receiving such assets; liability depends on the degree of knowledge or involvement in the wrongdoing.

Parliament went a step further by enacting the Property (Digital Assets etc) Act 2025, section 1 of which confirms that personal property rights can attach to digital assets.

Bittrex builds on these principles by addressing the issue of insolvency directly, demonstrating that, depending on the legal and regulatory framework, cryptoassets held by exchanges may remain beneficially owned by customers rather than forming part of the exchange’s assets that could be used in liquidation.

Why custody wording matters in crypto

For investors, institutions and customers, the decision emphasises the importance of custody arrangements.

All personal property has traditionally been classified as either tangible property or a chose in action, an intangible right enforceable through legal proceedings, such as a debt, contractual entitlement, or shares. Digital assets such as Bitcoin and other cryptocurrencies, however, do not fit neatly within either category. They are neither physical objects nor conventional rights enforceable against an identifiable party, which has made both their legal classification and the nature of their custody increasingly complex

Together, the three cases demonstrate a growing judicial consensus that cryptoassets are capable of attracting proprietary remedies. ByBit firmly recognises cryptoassets as choses in action, while D’Aloia confirms their traceability but limits exchange liability to cases involving sufficient knowledge. Bittrex goes further, adopting a functional, insolvency-focused approach to hold that customer assets remain beneficially owned by users.

Importantly, Bittrex also underscores that it is not enough to rely on labels such as “wallet” or “account”. Courts will instead examine the substance of the arrangement, including whether assets are properly segregated and whether the platform treats those assets as belonging to customers or to itself.

For institutional investors, this has clear implications for risk management and due diligence when selecting custodians. For retail users, it highlights the importance of understanding the terms governing their accounts and the extent to which their assets may be exposed in an insolvency scenario.

Key takeaways

Custody language is not enough; simply describing an arrangement as custodial or referring to “trust accounts” will not be enough to determine custody of the asset.

Courts will examine the full legal and factual structure; the analysis will focus on substance over form, including how assets are held, segregated and treated in practice.

Crypto disputes increasingly require coordinated expertise; effective resolution requires an integrated approach across insolvency, trust law and asset recovery.