In a case related to the now-defunct crypto exchange Gatecoin, a Hong Kong court has decreed that cryptocurrencies are “property” which is “capable of being held on trust.” According to the law firm Hogan Lovells, this judgment should provide clarity to insolvency practitioners and other common law jurisdictions.
Hong Kong Court Grants Crypto Assets Status of ‘Property’ That Can Be ‘Held on Trust’
As per a summary of the ruling published on April 18, 2023, judge Linda Chan in Hong Kong has identified crypto assets as “property.” The decision was made in connection with the Gatecoin crypto exchange liquidation case from 2019. Legal firm Hogan Lovells believes that this decision grants clarity to government authorities, regulators, and other common law jurisdictions. In the US, Congress is now debating whether certain crypto assets should be classified as securities or commodities.
At the beginning of the Gatecoin liquidation procedure, liquidators had difficulty deciding whether crypto assets constituted a form of property. According to the Hogan Lovells summary, judge Chan has described crypto assets as a kind of property that can be “held on trust.” Hogan Lovells states that this ruling “should provide greater clarity to Hong Kong insolvency practitioners regarding the nature and scope of a company’s digital assets in a winding-up scenario.” The law firm goes on to add:
The confirmation that holdings of cryptocurrencies constitute ‘property’ that is on a par with other intangible assets such as stocks and shares, brings Hong Kong into line with other common law jurisdictions whose courts have already determined the issue.
Judges in various court cases around the world have issued similar rulings. For example, last year, an intermediate court in Beijing, China ruled that virtual property is protected by Chinese law. Additionally, China’s Supreme Court has recommended increasing the legal protection of property rights that include crypto assets and virtual property. Research shows that most countries consider virtual currencies as property, while other countries and regulatory agencies have yet to make a decision.
What are your thoughts on the classification of crypto assets as “property” by Judge Chan in Hong Kong, and how do you think this decision will affect the treatment of crypto assets in insolvency cases and other common law jurisdictions around the globe? Share your insights about this subject in the comments section below.
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