In a court case related to former crypto exchange Gatecoin, a Hong Kong judge ruled that cryptocurrencies are “property” that are “capable of being held in trust.” According to law firm Hogan Lovells, this case should bring more clarity to insolvency practitioners and other common law jurisdictions.
Hong Kong judge designates crypto assets as ‘property’ that can be ‘held in trust’
According to a decision summary published on April 18, 2023, Judge Linda Chan in Hong Kong classified crypto assets as “property”. The decision was made as part of crypto exchange Gatecoin’s 2019 liquidation court case. Law firm Hogan Lovells believes the decision brings clarity to officials, regulators and other jurisdictions in common right. In the United States, there is currently a debate in Congress about whether certain crypto assets should be classified as securities or commodities.
Early in Gatecoin’s liquidation process, liquidators struggled to determine whether the cryptoassets constituted a form of property. According to Hogan Lovells’ summary, Judge Chan defined crypto assets as a type of property that can be “held in trust.” Hogan Lovells notes that the ruling “should provide greater clarity to Hong Kong insolvency practitioners regarding the nature and scope of a company’s digital assets in a liquidation scenario.” The law firm adds:
The confirmation that cryptocurrency holdings constitute “property” which is on equal footing with other intangible assets such as stocks and shares, brings Hong Kong into line with other common law jurisdictions including the courts have already decided the question.
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 was protected under Chinese law. Additionally, the Supreme Court of China 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 regulators have yet to make a decision.
What do you think of the classification of crypto assets as “property” by Judge Chan in Hong Kong, and how do you think this decision will impact the treatment of crypto assets in insolvency cases and other jurisdictions of common law in the world? Share your thoughts on this topic in the comments section below.
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