The Prosperity and Challenges of the Crypto Assets Market: A New Chapter in Hong Kong's Judiciary

Recently, the Hong Kong High Court has established an important judicial precedent in the field of Crypto Assets, a move that has attracted widespread attention and discussion within the industry.

The High Court of Hong Kong Innovatively Uses Blockchain Technology to Issue Injunctions

At the end of last year, the High Court of Hong Kong issued a striking injunction. The case involves a private limited company established in March 2015 in Hong Kong, which primarily engages in marketing consulting services. The company suffered from telecom fraud last December, resulting in a loss of nearly 2.6 million USDT. The company's manager swiftly applied to the High Court of Hong Kong through legal means, requesting an asset freeze injunction against the two Tron wallet addresses involved in the case.

The deputy judge of the High Court of Hong Kong, Douglas Lam, swiftly issued the injunction and sent it directly to the involved wallet address through a technology company. This practice is equivalent to "tagging" the involved wallet on the blockchain, allowing anyone who transacts with these wallets to see the injunction recorded on the blockchain. Under Hong Kong law, violating an injunction may result in a contempt of court charge, facing imprisonment or fines.

The Significant Importance of This Case

This judicial innovation addresses the litigation challenges brought about by the anonymity of Crypto Assets. In past disputes involving coins, the victim often only knew the other party's wallet address and could not confirm their identity, making it extremely difficult to resolve issues through legal means. The Hong Kong High Court has now approved the issuance of injunctions directly to wallet addresses, effectively solving the "only know the wallet, not the real person" problem, thereby opening up new avenues for handling similar disputes.

The "security" of Crypto Assets is under challenge

Some investors choose Crypto Assets partly because of their "anonymization" feature, believing that this can "protect" assets in legal disputes. However, the recent actions of the Hong Kong High Court show that even if exchanges or stablecoin issuers do not cooperate, judicial authorities can still issue judicial orders directly to wallet addresses. This means that the space for evading judicial control by utilizing the anonymization feature of Crypto Assets is gradually shrinking.

Review of Judicial Development in the Hong Kong Crypto Assets Sector

1. Recognizing Crypto Assets as "Property": In the early 2023 Gatecoin case, the Hong Kong Original Court ruled for the first time that Crypto Assets are classified as "property" under Hong Kong law and can be protected by relevant laws. This ruling is consistent with the positions of other major common law jurisdictions.

2. Stablecoin legislation introduced: The stablecoin legislation launched in Hong Kong provides a comprehensive compliance path and requirements for fiat-backed stablecoins, effectively safeguarding the financial security of stablecoin holders and institutions.

3. Ensuring Crypto Assets through Blockchain Technology: The latest step allows for direct issuance of injunctions to wallet addresses, breaking the past dilemma of being unable to seek legal remedies due to the inability to confirm the identity of crypto fraudsters.

These measures demonstrate the efforts of Hong Kong's judicial authorities in promoting Hong Kong as a Crypto Assets hub and reflect the innovations of the traditional judicial system in adapting to the development of financial technology.