Bybit CEO Applauds Hong Kong and UAE Regulatory Approaches

Chinese Court Recognizes Virtual Assets as Legal PropertyAccording to a recent report published by the People’s Courts of the People’s Republic of China, a Chinese court has recognized the legal status of virtual assets, having analyzed their attributes within the framework of Chinese criminal law.The court unequivocally stated that virtual assets are considered legal property under the current legal policy framework and are thus protected by law.The People’s Courts of the People’s Republic of China exercise judicial power independently, free from interference by administrative or public organizations. They have responsibility for adjudicating civil, criminal, and administrative cases.Photo by Christian Lue on UnsplashProperty classificationLocal news source Odaily News reported on the development on Friday, indicating that the report, titled “Identification of the Property Attributes of Virtual Currency and Disposal of Property Involved in the Case,” explicitly recognized the economic attributes of virtual assets, leading to their classification as property.This declaration is particularly significant in light of China’s sweeping ban on decentralized cryptocurrencies. Despite this ban, the report argues that virtual assets held by individuals should enjoy legal protection within the existing policy framework.Furthermore, the report proposed recommendations for addressing crimes involving virtual assets. It emphasized that in cases where money and property are involved, confiscation should be based on the integration of criminal and civil law. The approach taken aims to strike a balance between safeguarding personal property rights while also addressing broader social and public interests.Contentious approach to cryptoWhile China has been making every effort to promote its central bank digital currency (CBDC) and the development of blockchain and metaverse-related technology within the country, its stance on decentralized cryptocurrencies has been contentious at best.Its approach in that respect has been marked by a blanket ban on crypto-related activities such as mining and trading and the prohibition of foreign crypto exchanges from serving customers within mainland China. Nevertheless, Chinese courts have consistently taken a more nuanced view without necessarily contradicting the government’s approach.Differing interpretationsThe divergence between national policy and court rulings first emerged in 2019 when the Hangzhou Internet Court found that Bitcoin is a form of virtual property, and on that basis, it is safeguarded by the law from the point of view of property rights. In May 2022, a Shanghai court affirmed that Bitcoin qualifies as virtual property and, as such, falls under the purview of property rights.Global issueIt’s not just the Chinese courts that are grappling with the issue of clarifying property rights relative to virtual assets. In April of this year, a case in Hong Kong involving defunct crypto exchange Gatecoin resulted in the courts determining that cryptocurrency is property and that on that basis, it’s “capable of being held in trust.”In July a Singaporean court determined that cryptocurrency is capable of being held in trust and on that basis, it should be recognized as property. Earlier this year, the High Court of Justice in London recognized non-fungible tokens (NFTs) as property.The report from the People’s Court reaffirms the legal status of virtual assets as protected property under Chinese law. This development highlights the ongoing divergence between China’s regulatory policy and the judicial interpretation of virtual assets, signaling a potential evolution in the country’s approach to cryptocurrencies.

Tongli Han, the CEO and CIO of Harvest Global, has expressed openness to the possibility of applying to offer Bitcoin and Ether exchange-traded funds (ETFs) to mainland Chinese investors through the Stock Connect program. This consideration is contingent on favorable developments in the next two years. Harvest Global, along with China Asset Management (ChinaAMC) and Bosera HashKey, recently launched Asia's first spot Bitcoin and Ether ETFs on the Hong Kong Stock Exchange, aligning with Hong Kong's ambition to establish itself as a global cryptocurrency hub. Han's remarks were delivered during the Bitcoin Asia conference in Hong Kong, underscoring the potential for expansion into the mainland Chinese market.Photo by Jimmy Chan on PexelsUncertain regulatory landscape and growth prospectsDespite the introduction of spot crypto ETFs in Hong Kong, uncertainty looms over mainland Chinese investors' access to such products through the Stock Connect program. China's regulatory stance towards the cryptocurrency industry remains stringent, with most commercial crypto activities prohibited on the mainland. While there is speculation regarding the potential inclusion of crypto ETFs in the eligible securities list of the Stock Connect program, approval remains uncertain. The debut of Hong Kong's spot crypto ETFs recorded modest trading volumes compared to their U.S. counterparts, signaling a cautious start. However, Han anticipates the potential for growth in the Asia region, envisioning the Hong Kong ETFs to potentially double the size of their U.S. counterparts. Despite differing opinions on growth prospects, market observers highlight challenges such as the relatively small size of the Hong Kong ETF market and restrictions on mainland Chinese investors' participation, underscoring the complexities facing the expansion of crypto ETFs in the region. 

3AC liquidators estimate 46% recovery while BVI court freezes $1BThe joint liquidators of the now-defunct Singaporean crypto hedge fund Three Arrows Capital (3AC) have provided creditors with an estimated 45.74% recovery rate for their claims in the bankrupt estate. Meanwhile, in parallel proceedings in the British Virgin Islands (BVI), a court has frozen $1 billion of founders’ assets.According to The Block, the details were disclosed in a December report to creditors by joint liquidators Russell Crumpler and Christopher Farmer of Teneo, the firm appointed to oversee the liquidation of the failed business.$1.16B in assetsAs of Dec. 18, the estimated value of 3AC’s assets was reported to be $1.16 billion, while claims totaling $2.7 billion are expected to be recognized for distribution. The liquidators highlighted that settlements in litigation against various parties, including DCG, Genesis and BlockFi, increased reported assets by an estimated $292 million. It’s important to note that the BlockFi settlement is still pending approval.A total of 154 claims, valued at $3.4 billion, were filed against the 3AC estate. The report indicates that $200 million of claims were not admitted for distribution, and $322 million in claims have either been rejected or are expected to be rejected. Additionally, $76 million in claims are currently under dispute. The report reveals that initial distributions to creditors are being planned for the first quarter of the upcoming year.Illiquid tokensThe breakdown of assets reveals that a large majority are illiquid tokens, subject to vesting periods, comprising 82% of the total. Only 6% of the portfolio is liquid, while equity and investments account for 6.9% and 4.8% is in cash. These illiquid tokens, totaling $563 million at current prices, consist of 13 different tokens with vesting schedules unlocking assets over the next three years, reaching $200 million by the end of 2024.To date, the liquidators have staked some of these tokens, resulting in $5.4 million in staking rewards. Liquidation efforts, including the sale of $34.5 million worth of liquid tokens and $15 million in NFTs, along with other asset sales, have generated a total of $66 million.Photo by Kemp Fuller on UnsplashFrozen assetsIn a related development, Bloomberg reported on Thursday that a British Virgin Islands court has frozen assets totaling $1.1 billion belonging to 3AC co-founders Su Zhu and Kyle Davies, along with Davies’ wife Kelly Chen. The liquidators filed a claim for insolvent trading against the founders for $1.078 billion, with additional claims against Davies for $66 million and Chen for $4.6 million.Teneo outlined the rationale behind the move in the following statement it made to Decrypt:“The worldwide freezing order has been sought in connection with claims that are being pursued by the liquidators that allege, amongst other things, that the Founders should be held responsible for causing 3AC’s position to deteriorate by an amount that is equivalent to the value of the freezing orders sought.”Su Zhu, who was under house arrest for the last few weeks, became free on Dec. 20. Zhu had been arrested in Singapore on Sept. 29 and sentenced to four months imprisonment, serving two-thirds of his sentence under house arrest.Throughout the bankruptcy proceedings, legal fees have accumulated to $49.7 million while the report suggests ongoing efforts to maximize creditor recovery.