The recent ruling of a Hong Kong court suggested that cryptocurrencies have property attributes, giving local insolvency practitioners greater clarity in terms of digital assets
The court ruling regarding Hong Kong-based crypto exchange Gatecoin, published by the law firm Hogan Lovells, concluded that cryptocurrencies have property attributes.
Gatecoin suffered a hack in 2016, where the exchange lost around $2 million in digital assets. On March 2019, the exchange received a mandatory liquidation order from a Hong Kong court. Judge Linda Chan that decided on the case included crypto assets in question within the wider definition of property, deeming that it was appropriate to follow reasoning applied by other jurisdictions.
Thus, the US Internal Revenue Service recognizes cryptocurrencies as property for federal tax purposes. In China, a decision made by the Hangzhou Internet Court legally recognized Bitcoin as digital property as well.
The Hong Kong ruling creates a judicial precedent and provides greater legal clarity for both insolvency practitioners and industry players alike. In theory, that means that principles applicable to property transactions apply to transactions using crypto.
Greater legal clarity also contributes to Hong Kong’s ambitions of becoming a global crypto hub. The country has recently proposed milder crypto regulations that would let retail investors trade certain “large-cap tokens” on licensed exchanges.
The crypto-friendly environment immediately attracts major industry players. It’s no wonder that one of the largest financial institutions in Southeast Asia, DBS Bank is planning to expand its crypto trading services to Hong Kong as soon as it gets the necessary license.