Hong Kong’s judiciary has taken a significant step in recognizing cryptocurrency as property in a case involving the defunct crypto exchange Gatecoin.
The case emerged in 2019 when Gatecoin, a Hong Kong-based crypto exchange, announced its closure and liquidation following efforts to recover disputed funds from a former payment services provider. Liquidators sought directions from the court on how to treat the crypto assets held by Gatecoin, specifically whether they should be treated as property held on trust or made available to the general creditors.
Court’s Ruling: Cryptocurrency as Trustable Property
The court ruled that while cryptocurrencies are capable of forming the subject matter of a trust. It had not been established in this particular case. However, the decision provides greater clarity for Hong Kong liquidators on how to handle crypto assets held by companies during wind-down procedures, according to law firm Hogan Lovells.
This ruling follows similar legal precedents in other jurisdictions. Mainland China has also recognized crypto as property. The U.S. Internal Revenue Service (IRS) treats it as property for tax purposes. Additionally, a government-funded law commission in the U.K. has classified crypto as a new type of property under existing laws in England and Wales.
Significance for Hong Kong Liquidators
Hong Kong’s stance on crypto regulation has been evolving, with efforts to establish clearer guidelines for the crypto sector. Also, covers a wide range of assets and services. Earlier this year, brokerage firm Bernstein noted that Hong Kong’s approach to regulating crypto. It could attract capital to the jurisdiction during a time of global regulatory uncertainty.
The recognition of cryptocurrency as property in Hong Kong. It provides important legal clarity for the treatment of crypto assets in liquidation and winding down procedures. It acknowledges the growing significance of cryptocurrencies as a form of property. Aligns Hong Kong with other major jurisdictions in recognizing the legal status of digital assets.
As the crypto industry continues to evolve, it’s crucial for legal frameworks to keep pace with technological advancements. This ruling marks a significant development in the legal recognition of cryptocurrency as property in Hong Kong.