Editorial | Tokenised legal notice in Hong Kong shows value of courts keeping up with tech
Injunction using blockchain was served on unknown holders of two cryptocurrency wallets, barring them from disposing of assets obtained through a scam
Hong Kong’s legal system is, in many respects, playing catch up with developments around the world which have seen new technology embraced and deployed. Progress has been made in the use of remote hearings and the electronic filing of court documents, with voice-to-text recording of proceedings and broadcasting of cases trialled. In the fast-developing field of cryptocurrency, the city has set some key precedents. This is a positive sign.
A High Court injunction has been served, using tokenised technology, on the unknown holders of two cryptocurrency wallets. This is believed to be a first among major common law jurisdictions. The order concerns a fraud claim by a marketing firm that transferred US$2.66 million worth of Tether, a stablecoin, to the wallets, falling victim to a scam. The injunction prohibits disposal of the assets.
Traditionally, court orders are served in person or by post. But this is not possible when defendants are unknown and their “addresses” are on a blockchain. The innovative placing of a tokenised legal notice on the wallets overcomes this problem, making anyone dealing with the assets aware they are the subject of a court order.
This, it is intended, will effectively freeze the funds and prevent their use by the perpetrators of the scam. A record last month showed around US$1 million worth of Tether was still in one of the accounts. The notice warns the defendants and anyone who assists them in breaching the injunction they may face contempt of court proceedings and a jail term or a fine.
Difficulties remain in tracking down the culprits and punishing them for contempt if they breach the order. But the service of the document at least warns law-abiding cryptocurrency exchanges that they should not handle the funds. It is a step forward.
The move follows an unprecedented Hong Kong court ruling last year requiring a cryptocurrency finance project involving a decentralised autonomous organisation (DAO) to provide financial information as part of a legal dispute. This provided clarity and furthered both accountability and transparency.
