- In the context of a lawsuit involving the now-defunct Gatecoin cryptocurrency exchange, a Hong Kong court has recognized cryptocurrencies as property that can be “held in trust.”
- Gatecoin announced its closure and liquidation in 2019 following an attempt to recover disputed funds from a former payment service provider.
- The liquidators sought instructions from the court on whether the cryptocurrencies held by Gatecoin should be treated as trust property or made available to the general body of creditors.
Bitcoin, the creation of the unknown Satoshi Nakamoto, changed the economy forever, creating a product that gained value and around it an ecosystem was formed that evolves every day and finds more and more followers. His growth also generated, as was reported on several occasions, that governments set their eyes on him.
In Hong Kong a unique event occurred: a court in the Asian country recognized cryptocurrencies as property. LThe determination of the jury chaired by Linda Chan was made during the trial involving the now-defunct Gatecoin exchange, as published CryptoSlate.
Cryptocurrencies as property
Digital assets, which can be “held in trust”, received in this case the endorsement of local justice. The sentence, even though it is historic, is in line with what other commercial powers such as China and the United Kingdom have already established in England and Wales for the moment, where there have already been resolutions that made the same decision.
For its part, although the United States did not declare cryptocurrencies “property”, which is undoubtedly a very broad concept, the United States Internal Revenue Service (IRS) did. In this way, they do have the right to charge for the profits achieved with these for being a property for federal tax purposes. The principles that apply to property transactions also apply to cryptocurrencies.
The Gatecoin case
It is important to clarify that the Gatecoin case is a lawsuit against the centralized exchange that reported its closure and also liquidation in 2019 after failing to recover funds from a “ddispute with an old payment service providereither”.
“The liquidators requested instructions from the court as to whether the cryptocurrencies held by Gatecoin should be treated as trust property or made available to the general body of creditors.”highlighted the law firm Hogan Lovells.
In October 2022, the exchange’s holdings were valued at $17.8 million, which is likely more today. Back then BTC was trading in the $19,000 range while today it is close to $30,000. Ethereum, for instance, was worth $1,300 and is currently up as high as 2,000. It is not known what percentage of the portfolio were stablecoins.
While the court has declared that cryptocurrencies could be held in a trust, it clarified that no one had been established in the Gatecoin case. In this way, those affected do not yet know what will happen to their funds and if they will really be able to recover them after such a long wait.
An early ruling would give Hong Kong liquidators “greater clarity” on how cryptocurrencies held by centralized companies should be treated in these liquidation cases. At the same time, it would also give investors confidence to approach a territory that has a lot of international recognition in the area of finance.
What happened to Gatecoin at a certain point may set a precedent for what will be the liquidation of FTX (if it materializes). The Sam Bankman-Fried exchange, who is facing criminal charges, has thousands of affected people still seeking answers. Many of them have already given up, although others remain firm in their fight to recover their capital.
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