The legal treatment of cryptocurrency continues to evolve across common law jurisdictions, with growing consensus that digital assets qualify as property under existing legal frameworks. However, significant uncertainty remains regarding their precise classification and the remedies available when disputes arise—particularly in cases involving breach of contract, valuation, and enforcement.
This article explores the current state of cryptocurrency law, focusing on key developments in Hong Kong and other leading jurisdictions. It examines how courts classify crypto assets, the types of legal remedies available to claimants, and the complex challenges surrounding valuation in a highly volatile market.
Cryptocurrency Classification: Property, Not Currency
Despite widespread adoption, most legal systems—including Hong Kong—do not recognize cryptocurrency as legal tender. Under the Currency Ordinance (Cap. 65), digital currencies such as Bitcoin (BTC) or Ethereum (ETH) are not considered法定 currency in Hong Kong. Similarly, the UK Law Commission has expressed skepticism about treating crypto as foreign currency in its consultation paper Digital Assets (Law Com No 256).
However, this does not preclude cryptocurrencies from being recognized as property—a crucial distinction for legal enforceability.
In Re Gatecoin Limited (In Liquidation) [2023] 2 HKLRD 1079, the Hong Kong court affirmed that cryptocurrency meets the classic legal definition of property: it is (i) definable, (ii) identifiable by third parties, (iii) capable of being assumed by third parties, and (iv) possesses a degree of permanence or stability. This ruling reinforces the principle that crypto holders have enforceable rights akin to traditional asset ownership.
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Types of Cryptocurrencies and Their Legal Implications
Understanding the different categories of digital assets helps clarify potential legal obligations and remedies:
Native Cryptocurrencies
These operate on their own blockchain networks—such as BTC on Bitcoin or ETH on Ethereum. They are not issued by a central authority and function independently within their ecosystems.
Utility Tokens
Built on existing platforms (often Ethereum), these tokens grant access to specific services or features within a decentralized application (dApp). Their value is typically tied to usage rather than speculation.
Stablecoins
Designed to minimize volatility, stablecoins are pegged to traditional assets like the US dollar or gold. For example, Tether (USDT) claims each token is backed by one US dollar in reserves. This linkage may influence how courts assess value in disputes.
Wrapped Tokens
Also known as "wrapped assets," these represent an original cryptocurrency locked on another blockchain. For instance, Wrapped Bitcoin (WBTC) allows BTC to be used on the Ethereum network. Like stablecoins, wrapped tokens derive value from an underlying asset—but in this case, another crypto asset rather than fiat.
While these distinctions matter for technical and regulatory purposes, legally they often converge under the broader category of intangible property.
Available Legal Remedies in Crypto Disputes
Because most jurisdictions do not treat cryptocurrency as money, claimants cannot typically bring a debt claim—which requires a fixed sum of recognized currency. Instead, disputes involving crypto transfers are treated as claims for non-delivery of goods or property.
This means plaintiffs usually pursue breach of contract claims, seeking either:
- Compensatory damages (monetary compensation), or
- Specific performance (enforcement of the original agreement to transfer crypto)
Compensatory Damages
The default remedy for breach is financial compensation intended to place the plaintiff in the position they would have been had the contract been fulfilled. However, due to extreme price volatility, calculating fair compensation is inherently challenging.
Courts generally start with the date-of-breach rule, assessing value on the day the defendant failed to perform. But exceptions exist—especially when market conditions make that date unrepresentative.
Specific Performance: When Can It Be Enforced?
Specific performance orders compel a party to fulfill their contractual obligations—such as transferring a specified amount of cryptocurrency. However, courts exercise discretion and typically grant such relief only if:
- Damages are inadequate to compensate the plaintiff; and
- Enforcement would not impose undue hardship on the defendant
Recent cases illustrate judicial reluctance to order specific performance for crypto transfers:
- In B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 3, the Singapore International Commercial Court rejected a claim for specific performance despite finding Quoine liable for unilaterally reversing BTC trades. The court held that damages were sufficient and that forcing Quoine to repurchase BTC at inflated prices would cause disproportionate hardship.
- Similarly, in Oliver Southgate v Adam Graham [2024] EWHC 1692 (Ch), the English High Court declined to enforce an oral agreement to return ETH. While acknowledging crypto qualifies as property, the court ruled that crypto contracts are not inherently special—and thus do not automatically justify specific performance.
These rulings signal that even though crypto is property, courts remain cautious about compelling delivery unless truly necessary.
Valuation Challenges in Crypto Litigation
Given the limitations on debt claims and specific performance, valuation becomes central to determining appropriate remedies in breach cases.
Two critical factors shape this process:
(i) Choice of Valuation Date
While the default is the date of breach, courts may consider alternative dates depending on fairness and market context.
In Southgate v Graham, the plaintiff transferred 144 ETH worth £50,000 in June 2018 under an agreement for repayment with 10% premium. By October 2019, when the defendant defaulted on 115.69 ETH, ETH prices had dropped significantly. The trial judge assessed damages based on the value at breach, disadvantaging the plaintiff.
On appeal, the plaintiff argued for valuation at the date of judgment, when ETH prices had recovered. Although unsuccessful in this instance, the case highlights how timing can drastically affect recovery amounts—especially in volatile markets.
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(ii) Valuation Methodology
Courts must decide which pricing source to rely on—exchange rates vary across platforms and time zones. Options include:
- Volume-weighted average price (VWAP)
- Median price across major exchanges
- Price at a specific exchange agreed upon in contract
To avoid ambiguity, parties should specify valuation methods and sources in writing when entering crypto agreements.
Frequently Asked Questions
Q: Can I sue someone for failing to pay me in cryptocurrency?
A: Yes—but not as a debt claim. You can file for breach of contract, arguing failure to deliver agreed-upon digital assets.
Q: Is cryptocurrency legally recognized as property in Hong Kong?
A: Yes. In Re Gatecoin, Hong Kong courts confirmed crypto satisfies the traditional criteria for property rights.
Q: Can I force someone to transfer cryptocurrency through court order?
A: Possibly, but difficult. Courts may refuse specific performance if damages suffice or if enforcement causes hardship.
Q: How do courts value cryptocurrency in lawsuits?
A: Typically using market value on the date of breach, though alternative dates may apply depending on fairness and market conditions.
Q: Are stablecoins treated differently legally from other cryptos?
A: Potentially. Their peg to stable assets like USD may simplify valuation and strengthen arguments for debt-like treatment—but no definitive precedent yet exists.
Q: What should I include in a crypto transaction agreement to protect myself legally?
A: Specify transfer terms, valuation method, governing law, dispute resolution mechanism, and preferred remedy in case of default.
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