Analysis: Hong Kong Court Sets Precedent in Case Involving Shuttered Crypto Exchange Gatecoin

April 21, 2023

By Joe Pan

On March 31, Hong Kong court set a precedent in a case involving the now-defunct crypto exchange Gatecoin, recognizing crypto as property “capable of being held on trust”. Justice Linda Chan, who presided over the case of Gatecoin Limited [2023] HKCFI 91, said that Hong Kong, like other common law jurisdictions, defines “property” broadly and intends to have a wide meaning. In short, the court found that cryptocurrency inherently has all the attributes of property.

The liquidators of Gatecoin, which held up to 140 million Hong Kong dollars ($17.8 million) in crypto as of last October, sought direction from the court on how to treat the crypto held by the exchange in a wind-down procedure. The court’s ruling gives Hong Kong liquidators more clarity on how crypto assets held by companies should be treated in such procedures.

“This is the first time the Hong Kong High Court has declared that cryptocurrency is property and capable of forming the subject matter of a trust as a matter of Hong Kong law,” said Byron Phillips (, a Hong Kong based partner at the law firm of Hogan Lovells who authored the much-quoted analysis of the Gatecoin ruling.

Byron Phillips, a Hong Kong based partner at the law firm of Hogan Lovells

“The decision aligns Hong Kong, which seeks to establish itself as a digital assets hub, with other common law jurisdictions such as Australia, BVI, Canada, England & Wales, New Zealand, Singapore and the US. It is a welcome development that will have significant  implications in Hong Kong including as to legal and beneficial ownership of cryptocurrency (and the extent to which security may be granted over it), in insolvency situations where liquidators and other officeholders seek to determine the proper treatment of cryptocurrency, and in cases of fraud and breaches of fiduciary duties how ownership can be traced and assets preserved or recovered.” Phillips added.

The decision has the potential to lead to more stringent regulation of digital assets in Hong Kong, as well as to clarify the tax implications of cryptocurrency. Gatecoin, which was unable to recover disputed funds from a previous payment services provider, ceased operations in March 2019 and was subsequently ordered to enter liquidation. The liquidators of Gatecoin sought guidance from the court on how to treat the crypto assets held by the exchange – whether they should be regarded as property held in trust or made accessible to all creditors.

Nathan Simmons,  in-house legal counsel of VDX

According to Nathan Simmons ( , in-house legal counsel of VDX (, a digital asset platform based in Hong Kong, “It is a positive development to see the Hong Kong courts recognise digital assets as property ‘capable of being held on trust’, and echoes international decisions by courts in the UK, Australia and US which reached similar conclusions. Recognising cryptocurrencies as property in this way further cements Hong Kong’s international reputation as a digital asset hub, and improves clarity on how liquidators should treat digital assets in winding up proceedings.”

However, Simmons also noted that “while the court determined that digital assets are capable of forming the subject matter of a trust, it is important to note that this case found that a trust had not in fact been validly formed over the property, which highlights the benefits of client asset segregation available through regulated digital asset platforms and institutions.”

Hong Kong has been working to establish clearer regulations for the crypto sector. Investors around the world are keeping close eyes on the much anticipated release of the Virtual Asset Service Provider (VASP) license consultation findings on 1 June.

About the author

Joe Pan is an editor and producer at

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