Hong Kong is at the forefront of enhancing regulatory frameworks for digital assets and exchanges related to cryptocurrencies in the city.
A groundbreaking judgment was made by the High Court of Hong Kong, which classified cryptocurrency as property. The release of a new report confirms this ruling and signifies the first instance where the city has acknowledged digital currencies as property.
Gatecoin Limited, a cryptocurrency exchange platform that operated in Hong Kong from 2015 until its collapse four years later, faced legal action that led to a judgment being issued against them.
Before this, regulatory authorities in Hong Kong had directed Gatecoin to halt its operations within the city due to the exchange’s inability to settle its outstanding debts following the loss of assets resulting from a dispute with its service providers.
Gatecoin was instructed to halt its operations after failing to comply with regulatory requirements set by the watchdogs. This was due to the exchange needing to pay more attention to its duties and responsibilities towards its clients.
Subsequently, following the closure of Gatecoin, customers approached the court to determine the ownership of the remaining cryptocurrency assets held within the exchange’s accounts. The customers sought clarification on whether the assets belonged to Gatecoin or the customers as a trust.
Justice Linda Chan clarified to Gatecoin’s clients that the remaining funds on the platform were not held in trust. Nevertheless, according to Hogan Lovells, a local law firm, she highlighted that cryptocurrency is regarded as inheritable property.
Recent similar decisions in Mainland China and the United States Internal Revenue Service (IRS) treat cryptocurrencies as property for tax purposes.
This High Court ruling is expected to have far-reaching implications for how cryptocurrencies are treated in Hong Kong. Acknowledged as property, digital currencies can now enjoy the same legal safeguards as other assets.
This decision by the High Court represents a significant stride towards the mainstream adoption and recognition of cryptocurrencies in Hong Kong. It is also likely to spur further development and improvement of regulations surrounding using and exchanging digital assets within the city.