Hong Kong’s High Court has handed down a landmark ruling by recognizing crypto as property in a legal case involving the now defunct crypto exchange GateCoin.
Judge Linda Chan, who presided over the case, reportedly said that according to her analysis of the ruling, crypto has asset characteristics. published by law firm Hogan Lovells.
The court noted that Hong Kong, in line with other common law jurisdictions, defines “property” broadly as “a broad meaning intended to be possessed”.
“Like other common law jurisdictions, our definition of ‘property’ is an inclusive one and has a broad meaning.”
According to the law firm, the new rule could potentially provide insolvency practitioners in Hong Kong with greater clarity when it comes to digital assets.
Hogan Lovells said that Chan’s decision also means that crypto is legally able to stand on trust.
“The confirmation that holdings of cryptocurrencies are ‘property’ on a par with other intangible assets such as stocks and shares brings Hong Kong in line with other common law jurisdictions,” said Hogan Lovells.
The ruling was made in a case involving Gatecoin Ltd., a crypto exchange that operated domestically from January 2015 until its demise four years later.
In 2019, Gatecoin was ordered to cease operations and undergo liquidation after failing to recover lost funds in a disagreement with a payment service provider.
Following its closure in March 2019, Gatecoin’s liquidators sought court guidance on whether crypto held by Gatecoin still belonged to customers “on trust” or could be made available to general creditors.
According to a definition by Cornell University, a trust is a right, enforceable in equity, for the beneficial enjoyment of property held by another party who actually holds legal title.
In the case of Gatecoin, the crypto held for the benefit of specific customers in the event of liquidation will be in a fiduciary capacity where the exchange will be responsible for custody and management before being returned.
The exchange held up to 140 million Hong Kong dollars ($17.8 million) in crypto as of last October, the report said.
Hong Kong joins other countries to recognize crypto as an asset
The recent ruling by Hong Kong comes as other countries previously recognized crypto as property for legal purposes.
In the US, for example, the Internal Revenue Service recognizes Crypto as property for tax purposes. This means that the principles that apply to asset transactions apply to transactions using crypto.
Similar rulings have followed in mainland China, where the Hangzhou Internet Court recognized bitcoin as a legal digital asset in 2019.
Furthermore, a government-funded law commission in the UK has found that crypto can be classified as a new type of property under existing laws in England and Wales.
It is worth noting that Hong Kong’s property regime comes as the city-state aims to reclaim its status as a global crypto hub By taking a more crypto-friendly stance.