A court in Hong Kong has recognized cryptocurrencies as property that can be held in trust, as per a ruling in a case related to the defunct crypto exchange Gatecoin.
The ruling, analysed by law firm Hogan Lovells, saw Judge Linda Chan state that crypto has property attributes. The court’s decision followed reasoning applied by other jurisdictions, which viewed crypto as a form of property that could form the subject matter of trust. Chan noted that, like many common law jurisdictions, Hong Kong’s definition of ‘property’ is intended to have a wide meaning.
“Like other common law jurisdictions, our definition of ‘property’ is an inclusive one and intended to have a wide meaning.“
The ruling can offer insolvency practitioners greater clarity around digital assets. It also aligns Hong Kong with other jurisdictions, confirming that crypto constitutes property similar to other assets like stocks. The case in question focuses on Gatecoin, which lost around $2m in digital assets during a 2016 hack. The exchange received a mandatory liquidation order from a Hong Kong court in March 2019.
In the US, the Internal Revenue Service views cryptocurrencies as property for federal tax purposes. This means that transactions with crypto are subject to the principles applicable to other property transactions. A similar recognition of crypto as property took place in China in 2019, when a ruling from the Hangzhou Internet Court viewed Bitcoin as digital property.
In spite of a ban on crypto-related activities in China, the state-affiliated banks are partnering with and onboarding regulated crypto firms in Hong Kong. Hong Kong is trying to establish itself as a global crypto hub in the region.
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