Recently, a Hong Kong court has recognized cryptocurrency as property "capable of being held on trust" in a case involving the defunct crypto exchange Gatecoin. This marks a significant legal recognition of cryptocurrencies as property in the jurisdiction.
The decision by the court is in line with other common law jurisdictions like the US, where the Internal Revenue Service treats cryptocurrency as property for tax purposes. Additionally, a government-funded law commission in the UK also found that crypto can be classified as a new type of property under existing laws in England and Wales.
The case involving Gatecoin arose in 2019 when the Hong Kong-based crypto exchange announced its closure and liquidation following an attempt to recover disputed funds from a former payment services provider. The liquidators sought directions from the court on whether the crypto held by Gatecoin should be treated as property held on trust or made available to the general body of creditors if no trust existed.
The ruling is significant because it provides a legal framework for the treatment of cryptocurrencies in insolvency proceedings and could pave the way for greater legal recognition of crypto assets in Hong Kong. It is a positive development for the cryptocurrency industry, which has been grappling with legal and regulatory uncertainties.
The recognition of cryptocurrency as property by the Hong Kong court is a welcome development that could have far-reaching implications for the treatment of crypto assets in the country. This ruling provides greater legal clarity and certainty, which is crucial for the growth and development of the cryptocurrency industry.
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