Hong Kong Judge Linda Chan has classified cryptocurrencies as “property” that can be “held on trust” in a court case related to the now-defunct crypto exchange Gatecoin. This ruling provides greater clarity to insolvency practitioners and other common law jurisdictions, according to law firm Hogan Lovells. The judge’s decision was made in connection with the Gatecoin crypto exchange liquidation court case from 2019. At the beginning of the Gatecoin liquidation process, liquidators had difficulty determining whether crypto assets constituted a form of property. According to the Hogan Lovells summary, judge Chan has defined crypto assets as a type of property that can be “held on trust.”
Hogan Lovells notes 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 adds: “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 decided the issue.”
Other courts around the world have also 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 indicates that most countries consider virtual currencies as property, while others and regulatory agencies have yet to make a decision.
This ruling will impact the treatment of crypto assets in insolvency cases and other common law jurisdictions around the world. It provides greater clarity to officials and regulators in handling crypto assets as property in situations such as liquidation or winding-up scenarios.
The United States is currently debating whether certain crypto assets should be classified as securities or commodities. This ruling in Hong Kong provides a clear path for other common law jurisdictions to follow when classifying crypto assets in the future. It also establishes a legal precedent for the treatment of crypto assets as property.
In conclusion, this ruling by Judge Chan in Hong Kong classifying crypto assets as property that can be held on trust provides greater clarity to officials and regulators in handling crypto assets in situations such as liquidation or winding-up scenarios. It also establishes a legal precedent for the treatment of crypto assets as property in other common law jurisdictions around the world. This ruling will have a significant impact on the future of crypto asset regulation and classification.
