Hong Kong court rules cryptocurrency is a form of property for first time

Jennifer Wu of Pinsent Masons said: “Those who read our recent article will take no surprise that the Hong Kong courts have ruled that cryptocurrency is a form of property. This is aligned with findings in other common law jurisdictions and a welcomed decision.”

Gatecoin is a Hong Kong company, now in liquidation, which began operating a cryptocurrency exchange platform in January 2015. Customers were required to open and register an account with Gatecoin and deposit cryptocurrency or fiat currency to be able to make transactions and withdrawals.

The company was liquidated by the court on 13 March 2019. To date, the liquidators have contacted over 102,600 creditors, only 1,132 of which have submitted proofs of debt. Apart from the founders of Gatecoin, all creditors are customers with positive account balances in their accounts with Gatecoin. Of these, 316 preferred in-kind distributions to cash distributions.

The question before the court in this case was whether cryptocurrency falls within the meaning of "property".

Madam Justice Linda Chan held that cryptocurrency met the principles and requirements for “property” as stated by Lord Wilberforce in the well-known English case of National Provincial Bank v Ainsworth in 1965. To constitute “property”, something must be “definable, identifiable by third parties, capable in their nature of assumption by third parties, and have some degree of permanence or stability”. Applying these principles, the court then ruled that cryptocurrency “is property, which is capable of forming the subject matter of a trust”.

Before this case, courts in Hong Kong SAR have previously granted interlocutory proprietary injunctions over cryptocurrency and no party has ever suggested that cryptocurrencies should not be classed as property. However, the question had not yet been explicitly determined by a court.