In a case involving the now-defunct crypto exchange Gatecoin, a Hong Kong judge has ruled that cryptocurrency is “trustable property.” According to law firm Hogan Lovells, the case should provide greater 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 summaryof the rulingpublished on April 18, 2023, Hong Kong Judge Linda Chan classified crypto assets as “property.” The decision was made in connection with the Gatecoin crypto exchange clearing trial from 2019. Law firm Hogan Lovells opines that the decision provides clarity to authorities, regulators, and other common law jurisdictions. In the United States, Congress is currently debating whether certain crypto assets should be classified as securities or commodities.
At the outset of the Gatecoin liquidation process, liquidators struggled to determine whether crypto assets were a form of property; as summarized by Hogan Lovells, 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 for Hong Kong insolvency practitioners as to the nature and scope of a company’s digital assets in a corporate liquidation scenario.” The law firm adds:
The confirmation that cryptocurrency holdings are “property” on par with other intangible assets such as shares puts Hong Kong on par with other common law jurisdictions where courts have already decided this issue.
Judges in various courts around the world have made similar rulings. For example, last year the Intermediate Court in Beijing, China, ruled that virtual property is protected under Chinese law. In addition, China’s Supreme Court has recommended increased legal protection of property rights, including crypto assets and virtual property. According to the survey,most countriesconsider virtual currencies to be property, while other countries and regulators have yet to decide.
What do you think of Judge Chan’s classification of crypto assets as “property” in Hong Kong and how do you think this ruling will affect the treatment of crypto assets in bankruptcy cases and in other common law jurisdictions around the world? Please share your thoughts on this topic in the comments section below.
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