Virtual currency is a “trustable property”
A court in Hong Kong issued a ruling recognizing crypto assets (virtual currencies) as “property” that can be entrusted. Law firm Hogan Lovells discussed the ruling in detail today.
With this ruling, Hong Kong reached the same conclusion as courts in the United Kingdom, the United States, Australia, New Zealand, Singapore and Canada on the ownership of cryptocurrencies.
The lawsuit concerns the Hong Kong cryptocurrency exchange Gatecoin, which closed in 2019. Gatecoin was ordered by a Hong Kong court to shut down after suffering huge losses in its business, which financially prevented it from continuing to operate as an exchange.
Afterwards, Gatecoin liquidators should consider virtual currencies held by the exchange to be in trust for their customers, or should be considered out of trust and made available for collection by general creditors. I asked the court for instructions.
What is a trust
In general, a settlor entrusts a certain asset to a trusted trustee, and the trustee manages the asset according to the trust purpose determined in advance.
Liquidators are legally obligated to keep all “property”, but whether virtual currency falls within the scope of “property” in that context has become an issue.
“As in other jurisdictions, our definition of ‘property’ is intended to be inclusive and broad,” Justice Linda Chan explained. She adopted the view that cryptocurrencies are “property” and can be subject to trusts.
Hogan Lovells commented on the significance of this ruling:
The ruling clarifies the nature and scope of cryptocurrencies held by a company when it is liquidated in Hong Kong bankruptcy proceedings.
Hong Kong follows other jurisdictions with similar rulings, confirming that cryptocurrencies constitute “property” on a par with other intangible assets such as stocks.
In recent years, various countries and regions have passed judgments that consider virtual currencies to be legal property.
For example, in 2019, the UK Commercial Court ruled for the first time to recognize Bitcoin (BTC) as legal property. When some of the stolen bitcoins were sent to Coinbase UK by the hackers, the court issued an “asset protection order”, ordering the exchange to temporarily freeze the funds.
connection: British commercial court rules for the first time to recognize bitcoin as ‘legal property’
Also in China, the Shanghai First Intermediate People’s Court said that “Bitcoin is a virtual asset on the Internet and should be legally protected” in the Bitcoin robbery case. The rationale is that Bitcoin has properties such as value, scarcity, and expendability.
connection: “Bitcoin is a digital property protected by law” New judicial precedent in Shanghai, China
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