The Prosperity and Challenges of the Crypto Assets Market

Recently, the High Court of Hong Kong has created an important judicial precedent in the field of Crypto Assets, a move that has garnered widespread attention in the industry.

The High Court of Hong Kong Issues an Encryption Wallet Restraint Order Using Blockchain Technology

At the end of last year, the High Court of Hong Kong issued a striking injunction. The case involves a private limited company in Hong Kong, established in March 2015, which primarily engages in marketing consulting. The company suffered nearly 2.6 million USDT in losses due to a telecommunications fraud in December last year. The company’s representative quickly applied to the High Court of Hong Kong through legal channels, seeking an injunction against two involved Tron wallet addresses to freeze the assets within.

Just a few days later, Deputy Judge Douglas Lam of the Hong Kong High Court issued an asset freeze injunction. A technology company then issued the injunction to the wallet address involved using blockchain technology. This practice effectively marked the wallet in question with a "tainted funds" label, allowing anyone transacting with these wallets to see the injunction on the blockchain.

According to Hong Kong law, violating an injunction may lead to the crime of contempt of court, resulting in imprisonment or fines. This injunction effectively locks the liquidity of the Crypto Assets in the wallet involved in the case, effectively preventing the plaintiff from suffering greater losses.

Significant Importance

The significance of this legal action lies in its direct resolution of the litigation challenges posed by the anonymity of Crypto Assets. Traditionally, in most civil disputes involving Crypto Assets, the victim often only knows the wallet address of the other party and cannot ascertain their true identity, making lawsuits extremely difficult. The Hong Kong High Court has approved the issuance of injunctions directly to wallet addresses using blockchain technology, innovatively addressing the "only knowing the wallet, not knowing the real person" issue.

The "security" of Crypto Assets is facing challenges

Some investors choose Crypto Assets partly for their "anonymization" feature, believing it can "preserve" their assets in legal disputes. However, the recent actions of the Hong Kong High Court indicate that this "security" is no longer reliable.

The High Court of Hong Kong has directly named a crypto assets wallet address as the defendant and issued an injunction to the wallet through technical means, setting a precedent globally. Even if exchanges or stablecoin issuers do not cooperate, judicial authorities can still directly issue judicial orders to the wallet address, warning all potential trading parties that transactions with the wallet involved are illegal. This means that the space for evading judicial control by utilizing the anonymity of crypto assets is rapidly diminishing.

The Development History of Hong Kong's Crypto Assets Judicial System

1. Recognizing Crypto Assets as "property": The Gatecoin case in early 2023 is an important milestone. The Hong Kong original court ruled for the first time that Crypto Assets are considered "property" under Hong Kong law and are protected by relevant laws. This position is consistent with other major common law jurisdictions.

2. Stablecoin legislation introduced: Hong Kong has established a comprehensive compliance path and requirements for fiat-backed stablecoins, enhancing the financial security of stablecoin holders and institutions, and becoming an important bridge connecting traditional finance and blockchain technology.

3. Ensuring the security of crypto assets through blockchain technology: The case of the injunction described in this article is a reflection of this step. Even if the true identity of the defendant cannot be determined, as long as there is a wallet address, the court can issue an injunction, which greatly enhances the effectiveness of judicial protection.

These developments indicate that Hong Kong is striving to find a balance between protecting investor rights and promoting financial innovation, laying a legal foundation for building a Crypto Assets hub.