Landmark ruling highlights Hong Kong’s need for crypto regulatory framework
- High Court decision provides clarity and is consistent with principle that new legal entities in cryptocurrency must be open to scrutiny
The cryptocurrency industry has, at times, been described as a financial “Wild West”, freewheeling, volatile and resistant to regulation.
But the protection of investors and the development of an attractive environment for virtual assets are not mutually exclusive.
Hong Kong, with its aspirations to become a Web3 business hub, should be setting an example. The city has started work on a regulatory framework, intended to boost investor confidence, and is developing new rules.
When disputes arise, the courts also have an important role to play. Earlier this month, a landmark High Court ruling, described as a world first, took a step towards greater transparency and accountability.
The case concerns a battle over the ownership, management and control of a cryptocurrency finance project involving a decentralised autonomous organisation (DAO) that uses blockchain technology.
Plaintiffs who conceived and set up the project claim they delegated management to employees who then “misappropriated” its business and assets.
This is disputed by the defendants, who argue the ultimate decision-making power lies with purchasers of digital tokens, through voting rights, rather than any individual or entity.
