In a landmark ruling, a Hong Kong court has recognized cryptocurrencies as property that can be held in trust. The decision was made in a case involving the defunct crypto exchange Gatecoin, which collapsed in 2019.
Gatecoin was ordered to cease operations and undergo liquidation after losing money in a dispute with a payment service provider. The liquidators sought the court’s guidance on whether the cryptocurrencies held by Gatecoin belonged to its clients or could be distributed to its general creditors.
The court ruled that cryptocurrencies have property attributes and can form the subject matter of trust. The judge, Madam Justice Linda Chan, said that Hong Kong’s definition of property is inclusive and intended to have a wide meaning. She also said that it was appropriate to follow the reasoning applied by other common law jurisdictions that recognize cryptocurrencies as digital property.
The ruling aligns Hong Kong with other countries that treat cryptocurrencies as property for legal purposes. For example, the US Internal Revenue Service considers cryptocurrencies as property for federal tax purposes. The ruling also gives more clarity to insolvency practitioners in Hong Kong on how to deal with crypto assets in winding up procedures.
The ruling is seen as a positive development for the crypto industry in Hong Kong, which is striving to become a global crypto hub. The court’s recognition of cryptocurrencies as property could enhance the protection and security of crypto investors and users in the city-state. It could also encourage more innovation and adoption of crypto-related services and products in Hong Kong.