Hong Kong’s High Court has made a significant ruling recognizing cryptocurrency as a form of property. The groundbreaking decision came as part of a legal case involving Gatecoin Limited, a domestic cryptocurrency exchange that operated from January 2015 until its eventual closure four years later.
Judge Linda Chan presided over the case and stated that cryptocurrency possesses property attributes. She adopted the same reasoning used by other jurisdictions that recognize crypto as property and concluded that it could, therefore, be subject to a trust arrangement.
The recent ruling by the Hong Kong court brings the city-state in line with other jurisdictions that consider cryptocurrency as property, like stocks or real estate. Mainland China has made comparable judgments, whereas the United States Internal Revenue Service regards cryptocurrency as taxable property. In the United Kingdom, a government-sponsored law commission discovered that existing laws in England and Wales can categorize cryptocurrency as a form of property.
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The decision is significant in clarifying the legal status of cryptocurrency in Hong Kong and paving the way for its wider adoption and usage in the city-state. Additionally, Hogan Lovells, a law firm that analyzed the ruling, stated that it could help insolvency practitioners in Hong Kong better understand how to handle digital assets.
Gatecoin, the cryptocurrency exchange involved in the legal case, announced its shutdown and liquidation after trying to recover disputed funds from a former payment services provider. The appointed liquidators sought court directions on whether the cryptocurrency held by Gatecoin should be regarded as property held on trust.
The ruling provides liquidators in Hong Kong with increased clarity and understanding regarding the appropriate treatment of digital assets held by companies, especially during wind-down procedures. While the court determined that cryptocurrencies are capable of forming the subject matter of a trust more generally, it found that a trust had not been established on the facts in this particular case.
Overall, the ruling is a significant step towards the wider adoption and usage of cryptocurrencies in Hong Kong, and it could have wider implications for the treatment of digital assets in insolvency proceedings in the city-state.
