Escrow of digital assets and cryptocurrencies

Cryptocurrencies, tokens and tokenised assets are transforming the way value is transferred, yet they do not erase the risks of an over-the-counter deal: will the buyer pay, will the seller deliver? In traditional transactions, an escrow agent answers that mutual distrust. The same logic can apply to digital assets, provided their specific features are understood. This article, written for guidance, sets out why a trusted third party is useful, what the legal challenges are, what the PSAN and MiCA frameworks provide, and above all one essential point of accuracy: a lawyer's CARPA account holds euros, not crypto-assets.

Why use an escrow agent for crypto-assets?

A sale of digital assets is most often arranged over the counter (OTC), with no clearing house or intermediary guaranteeing completion. Each party is therefore exposed to the other's default. The escrow agent neutralises this counterparty risk by stepping in between them: it holds the financial consideration and only arranges its release once the agreed conditions are met. Several features of crypto-assets reinforce the need for such an intermediary:

• Volatility: a token's price can swing sharply between agreement and completion, which is why fixing a price in euros and keeping deadlines short matters;
• Custody of private keys: holding a crypto-asset means holding the key that commands its transfer — a security and liability issue in its own right;
• Irreversibility: a transfer confirmed on the blockchain cannot be reversed, which rules out any premature or misdirected payment;
• Counterparty risk: without a trusted third party, whoever performs first — payment or delivery — alone bears the risk that the other backs out.

The legal challenges specific to digital assets

Crypto-assets are legally characterised as intangible movable property, but handling them raises difficulties that conventional funds do not. Taking effective custody of a token means controlling a private key — a technical and risky operation. On-chain traceability is not identity: a wallet address, on its own, says nothing about its actual holder. Finally, verifying the source of funds and identifying the parties (anti-money-laundering, AML) is more delicate than for a bank transfer. These constraints explain why an escrow of digital assets is built case by case rather than on a single template. There is also an evidential difficulty: establishing title to a purely digital asset, and the reality of a transfer, calls for technical proof that often lies outside the usual reflexes of contract law. The trusted third party must therefore combine legal rigour with an understanding of how the blockchain works.

PSAN and the MiCA regulation: a framework under construction

In France, digital-asset service providers (PSAN) — in particular those providing custody of digital assets on behalf of third parties — fall under a registration, or even licensing, regime supervised by the AMF (the French financial markets authority). At European level, the MiCA regulation (Markets in Crypto-Assets) is progressively harmonising the status of crypto-asset service providers and the obligations attaching to custody. At a general level, two ideas are worth keeping in mind: holding crypto-assets for others is a regulated activity; and an escrow lawyer is not meant to stand in for a licensed custodian. This is one of the reasons why, in practice, the lawyer's involvement focuses on the consideration in euros.

A point of accuracy: a CARPA account holds euros, not tokens

This is the key point to grasp. The CARPA account on which a lawyer handles client funds is a euro bank account, controlled and ring-fenced matter by matter. It is not a crypto wallet: it holds no private keys and does not receive tokens directly. As a rule, therefore, a lawyer will not take custody of your bitcoins or NFTs on the CARPA account. What is placed in escrow is the price — the euro counter-value — of the transaction, or the lawyer coordinates a specific arrangement suited to the assets concerned. This distinction is not a technical detail: it determines the exact nature of the task entrusted to the lawyer.

How a crypto transaction is escrowed in practice

In practice, two complementary approaches emerge, to be tailored to each matter:

• Escrowing the price in euros: the buyer deposits the agreed counter-value on the CARPA account; the lawyer only releases it to the seller once the transfer of the tokens to the beneficiary's verified address is confirmed on the blockchain;
• Coordinating a specific arrangement: where it is the assets themselves that must be locked up, the lawyer organises and documents the mechanism — for example a multi-signature wallet or the use of a licensed custodian — and drafts the agreement setting the conditions for completion.

The logic mirrors that of the escrow of a valuable asset: the trusted third party secures the financial side of the exchange and conditions release on the actual delivery of the asset. The choice between these approaches depends on the nature of the tokens, the amount and the level of security sought. In either case, the lawyer acts only on the conditions of the agreement and never releases the funds unilaterally.

The escrow agreement adapted to crypto-assets

Everything rests on a carefully drafted escrow agreement, calibrated for the specific features of the transaction. It sets out, in particular:

• The conditions for release: confirmation of the on-chain transfer (the number of confirmations required) and verification of the recipient wallet address;
• The management of volatility: a price fixed in euros, tight deadlines and the treatment of any price movement;
• The AML checks: the identity of the parties and the source of funds, verified as part of anti-money-laundering obligations;
• The failure scenario: what becomes of the consideration if the transfer is not confirmed within the agreed period.

Since every transaction is different, these provisions must be adjusted to the case at hand: feasibility and the exact terms depend on the assets, the participants and the arrangement chosen. A prior review is essential.

Preparing a transaction involving cryptocurrencies or digital assets? Fidens secures the consideration in euros on a dedicated CARPA account and helps you structure the escrow of your transaction, from the agreement through to the release of funds.