Hong Kong High Court’s latest ruling could change the way we look at crypto…
A ruling in the bankruptcy case of Hong Kong-based crypto exchange Gatecoin has led to the crypto being recognized as property in the island city. The ruling will help guide liquidators as they manage the crypto assets of defunct businesses.
- A Hong Kong judge ruled that crypto could be defined as property and can be held in trust.
- Defunct crypto exchange Gatecoin looked towards the Hong Kong High Court to seek guidance on how to manage its crypto.
In a landmark ruling, Hong Kong’s High Court ruled that cryptocurrencies should be treated as property. This decision marks the first time that such a ruling has been made in Hong Kong, a move that is likely to have a considerable impact on the island city’s crypto industry. The latest development came as a result of a case involving the defunct crypto exchange Gatecoin.
Crypto is capable of being held in trust
According to an update from law firm Hogan and Lovell, the presiding judge found that crypto assets inherently have the potential defining characteristics of a property. And thus, must be treated as such.
Gatecoin was a Hong Kong-based crypto exchange that was operational between 2015 and 2019. Following its shuttering in 2019, Gatecoin’s liquidators turned to the court for guidance on how to handle the leftover crypto assets. The crypto could remain with Gatecoin as a property held in trust or be made available for general creditors.
Justice Chan’s ruling made it clear that crypto could be held in trust. The judge further added that considering common law jurisdictions, the definition of “property” is intended to have a wide meaning. As of October 2022, the defunct crypto exchange held $HKD 140 million or $17.8 million worth of crypto assets.
“The ruling should give Hong Kong insolvency practitioners greater clarity as to the nature and breadth of a company’s digital assets in a winding-up scenario. 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,” stated Hogan and Lovell’s Byron Phillips and Nigel Sharman.
