New Challenges in the Crypto Assets Market: Hong Kong Courts Set Judicial Precedent

Recently, the Hong Kong High Court made a groundbreaking judicial decision in the field of Crypto Assets, which may have far-reaching implications for the Crypto Assets market. Let's delve into this important event and its potential impact.

The Hong Kong High Court Issues an Injunction Against Crypto Wallets via Blockchain

At the end of last year, the High Court of Hong Kong issued an injunction against two Tron wallet addresses suspected of telecom fraud. This case stemmed from a Hong Kong marketing consultancy that suffered a loss of approximately 2.6 million USDT. The company quickly sought help through legal means, and the court responded promptly.

The injunction issued by Deputy Judge Douglas Lam was sent directly to the wallet address involved through a technology company. This practice is equivalent to "marking" the wallet involved on the blockchain, allowing anyone who transacts with these wallets to see the injunction. Under Hong Kong law, violating the injunction may lead to a charge of contempt of court, facing imprisonment or fines.

Significant Importance: Breaking Through the Legal Barriers Brought by Crypto Assets Anonymity

The significance of this judicial action lies in its provision of a new approach to resolving identity verification issues in Crypto Assets disputes. Traditionally, due to the anonymous nature of blockchain, law enforcement agencies have found it difficult to trace the actual controllers behind wallets, greatly increasing the difficulty and cost of handling related cases.

The decision of the High Court of Hong Kong directly named the wallet address as the defendant, bypassing the need for the actual identity of the controller. This approach provides a feasible solution for dealing with disputes where "only the wallet is known, but the real person is not," effectively lowering the litigation threshold for cases related to Crypto Assets.

The "security" of Crypto Assets is under challenge

One reason some investors choose Crypto Assets is the anonymity they provide, believing it can mitigate legal risks to some extent. However, the move by the Hong Kong High Court indicates that this "safety" is gradually being dismantled.

Courts can now issue judicial orders directly to Crypto Assets wallets, even if exchanges or stablecoin issuers do not cooperate. This means that even anonymous wallets may be subject to legal constraints, significantly reducing the space for evading legal sanctions by utilizing the anonymity features of Crypto Assets.

Review of Hong Kong's Crypto Assets Judicial Development

Looking back at Hong Kong's judicial development in the Crypto Assets field, several important milestones can be observed:

1. Recognizing Crypto Assets as "Property": In the Gatecoin case at the beginning of 2023, the Hong Kong Court of First Instance defined Crypto Assets for the first time as a legal "property", granting them protection under relevant laws.

2. Stablecoin legislation introduced: The stablecoin legislation launched in Hong Kong provides a clear compliance pathway for fiat-backed stablecoins, strengthening financial protection for stablecoin holders and institutions.

3. Ensuring Crypto Assets through Blockchain Technology: This latest measure allows for restraining orders to be sent directly to crypto wallet addresses, enhancing the effectiveness of judicial protection.

These measures demonstrate the active efforts of Hong Kong's judicial institutions to adapt to the development of financial technology and protect investors' rights, and they also lay a legal foundation for Hong Kong to become a center for Crypto Assets.