The High Court of Hong Kong has recognized crypto to be property and this landmark ruling was handed down in a legal matter involving Gatecoin Limited, reported by the law firm Hogan Lovells.
Gatecoin (not to be confused with Gate.io) was given the order to cease operations and go through liquidation after failing to recover funds. The cryptocurrency that Gatecoin still had after it was shut down in March 2019 prompted its liquidators to ask the court for guidance on whether it belonged to clients “on trust” or could be distributed to general creditors.
Cryptocurrency held in trust is held for the benefit of specific clients in the event of liquidation. In the case of Gatecoin, the exchange would be in charge of custody and management prior to the coin’s release, and the cryptocurrency would be held in a fiduciary capacity.
According to domestic law firm Hogan Lovells, Justice Linda Chan’s decision found that cryptocurrency inherently possesses all the characteristics of property. The law firm added that because “property” is all-inclusive and meant to have a broad definition, Chan’s decision also means that cryptocurrency can be held in trust under the law.
The affirmation that cryptocurrency holdings are “property” that is comparable to other intangible assets like stocks and shares aligns Hong Kong with other common law jurisdictions, according to Hogan Lovells.
The US Internal Revenue Service similarly sees cryptocurrency as property, even though other regulatory bodies define it differently depending on their jurisdiction. The property judgment comes as Hong Kong tries to rebuild its standing as a center for digital assets.
“We don’t want to stifle financial innovation, but rather level the playing field among participants to unlock the potential for the industry,” said Clara Chan, executive director of the Hong Kong central bank, at a Web3 Festival conference. We are excited to use Web3 as a force for good.
Compiled by Coinbold