Cryptocurrencies Gain Legal Recognition as Property in Hong Kong Court Ruling
A court in Hong Kong has recognized cryptocurrencies as a form of property that can be held in trust.
The decision was made during a case involving Gatecoin, a now-defunct cryptocurrency exchange.
Judge Linda Chan, who presided over the case, stated that cryptocurrencies have attributes of property and can therefore be subject to trust arrangements.
Chan explained that Hong Kong’s definition of “property” is broad and inclusive, and similar to that of other common law jurisdictions.
The ruling is expected to provide greater clarity for insolvency practitioners in Hong Kong when it comes to dealing with digital assets, as it aligns with similar decisions made in other jurisdictions around the world.
Gatecoin, a cryptocurrency exchange based in Hong Kong, suffered a major hack in 2016 that resulted in the loss of approximately $2 million worth of digital assets.
The exchange was subsequently issued a mandatory liquidation order by a Hong Kong court in March 2019.
In the United States, the Internal Revenue Service (IRS) recognizes cryptocurrencies as property for federal tax purposes, which means that property transaction principles are applicable to crypto transactions.
Similarly, in China, a court decision in 2019 declared Bitcoin as digital property.
As Hong Kong strives to become a global hub for the cryptocurrency industry, state-affiliated banks in China are seizing the opportunity to form partnerships with and onboard regulated crypto companies in Hong Kong, despite a ban on crypto-related activities in China.