A Hong Kong court has recognized crypto as property “capable of being held on trust” in a case involving shuttered crypto exchange Gatecoin, law firm Hogan Lovells reported on Wednesday.
Justice Linda Chan, who presided over the case, reportedly said Hong Kong, in line with other common law jurisdictions, defines “property” broadly “intended to have a wide meaning.”
There have been similar rulings in Mainland China, while the U.S. Internal Revenue Service (IRS) treats crypto as property for tax purposes. A government-funded law commission in the U.K. found crypto can be classified as a new type of property under existing laws in England and Wales.
In 2019, Hong Kong-based crypto exchange Gatecoin announced it will shut down and start liquidation following an attempt to recover disputed funds from a former payment services provider.
Liquidators sought directions from the court on whether the crypto held by Gatecoin should be treated as property held on trust or “if no trust existed, the digital assets should be made available to the general body of creditors,” according to the Hogan Lovells report. The exchange held crypto upwards of 140 million Hong Kong dollars ($17.8 million) in October 2022, the report said.
“While the court determined that cryptocurrencies are capable of forming the subject matter of a trust more generally, on the facts in this particular case it found that a trust had not been established,” the report said.
The ruling would give Hong Kong liquidators “greater clarity” on how crypto assets held by companies should be treated in wind-down procedures, reported Hogan Lovells.
Hong Kong has been pushing for clearer regulations for the crypto sector, covering a wide range of assets and services. Brokerage firm Bernstein said earlier this year that Hong Kong’s approach to regulating crypto could attract capital to the jurisdiction at a time of global regulatory uncertainty.
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CoinDesk has reached out to the Hong Kong judiciary for comment.
