The decision brings Hong Kong in line with other jurisdictions that recognize cryptocurrencies as digital assets.

A court in Hong Kong has recognized that cryptocurrencies are property that can be held in custody in a ruling involving defunct cryptocurrency exchange Gatecoin.

In her analysis of the ruling released by law firm Hogan Lovells, Judge Linda Chan reportedly said that cryptocurrencies have the attributes of property. The court considered it appropriate to follow the reasoning applied in other jurisdictions, namely that cryptocurrencies are property and can constitute the subject matter of a trust. Chan noted:

“Like other common law jurisdictions, our definition of ‘property’ is inclusive and intended to have a broad meaning.”

According to Hogan Lovells, the new ruling is likely to provide insolvency practitioners in Hong Kong with more clarity when it comes to digital assets. Confirming that cryptocurrencies constitute property similar to other assets such as stocks brings Hong Kong in line with other jurisdictions.

The case involved Gatecoin, a Hong Kong-based cryptocurrency exchange that was hacked in 2016 and lost approximately $2 million in digital assets. In March 2019, the exchange announced that it had received a compulsory liquidation order from a Hong Kong court.

In the United States, the IRS considers cryptocurrencies to be property for federal tax purposes. This means that the principles that apply to property transactions apply to transactions using cryptocurrencies. At the same time, courts have also recognized that cryptocurrencies are property in China. Back in 2019, a decision by the Hangzhou Internet Court recognized that Bitcoin is legally digital property.

China’s state-owned banks are taking the opportunity to establish partnerships and join regulated crypto companies in Hong Kong as the city pushes forward its goal of becoming a global crypto hub. The events took place despite China’s ban on crypto-related activities.