[NEWS] Hong Kong court rules that crypto assets are property

It has been revealed that a Hong Kong court has ruled for the first time that crypto assets (virtual currencies) are trustable property in relation to Gatecoin, which collapsed in 2019.

According to an announcement by law firm Hogan Lovells on the 18th, Judge Linda Chan acknowledged that crypto assets have property attributes.

With this decision, Hong Kong has reached a consensus with several legal jurisdictions, including the UK, the US, and Australia, in recognizing the ownership and nature of digital assets, including crypto assets.

In 2016, Gatecoin lost approximately $2 million (approximately 269 million yen) worth of digital assets due to a hacking incident. After that, differences of opinion with payment service providers made it impossible to recover the lost assets, making it difficult to continue business.

In March 2019, a Hong Kong court issued a compulsory liquidation order at the same time as an order to suspend the operation of crypto asset exchange services. A liquidator was appointed the following day.

The liquidators had sought guidance from the court on whether Gatecoin's crypto assets should be considered as held in trust or as assets available to general creditors.

According to the ruling, in the case of Gatecoin, the exchange will be placed in the position of trustee, responsible for the safekeeping and management of the crypto assets before their return.

It appears that Gatecoin's crypto assets were worth more than HK$140 million (approximately JPY 2.4 billion) as of October 31 last year. Judge Chan found that Gatecoin's creditors' funds were not held in trust, but ruled that crypto assets essentially have all the characteristics of property.

Hogan Lovells added that Judge Chan's ruling means that "crypto assets are legally trustworthy." It further stated that "the recognition that holdings of crypto assets constitute property equivalent to shares and other intangible assets is consistent with other jurisdictions."

As examples from various countries, the United States and the United Kingdom have already ruled that crypto assets have property value. In addition, in 2019, a Chinese court ruled that "although cryptocurrencies are not legal as a currency, they have commercial value as virtual assets and are protected by law."

Hong Kong is accelerating its efforts to become a hub for digital assets, including cryptocurrencies, and this ruling could be a tailwind.

At the Hong Kong Web 3.0 Festival 2023 held in April, Financial Secretary Paul Chan said, "The premise of Web 3.0 development is that the stability of the financial system and investor protection must not be compromised. The time is ripe for Hong Kong to invest in the Web 3.0 digital economy."

Source:Hogan Lovells
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