Authorities in Hong Kong have raised an alarm regarding a surge in the circulation of fake banknotes that are being introduced into the system through cryptocurrency scams. Recent reports from local sources indicate that the Hong Kong police confiscated 3,396 counterfeit notes from January to April 2024. These forged banknotes had a collective face value of HK$2.55 million, equivalent to around $326,130.

Interestingly, a significant portion of these counterfeit banknotes in circulation can be traced back to only three cryptocurrency scams and fraudulent activities. One such incident involved a scammer setting up a fake cryptocurrency platform at a cash counter in Tsim Sha Tsui, where an unsuspecting individual exchanged HK$1 million in Tether's USDT stablecoin, only to receive counterfeit HK$1,000 notes in return.

Similarly, another victim was duped of HK$1 million through a similar deceptive tactic, resulting in the fraudster absconding with the victim's USDT holdings. The police have disclosed that they seized 1,693 'training notes' and 347 low-quality counterfeit bills related to these fraudulent schemes. 'Training notes' are typically used for educating bank employees and bear a close resemblance to genuine currency.

In response to these incidents, the Hong Kong police have apprehended three individuals associated with these scams, and the illicit funds have been confiscated. Earlier this year, authorities also raided a cryptocurrency exchange shop in Tsim Sha Tsui, seizing 3,000 'hell banknotes,' a safe, and a note-counting machine. These 'hell banknotes' are traditionally used in Chinese rituals as offerings to ancestors and are remarkably similar to real currency.

As a preventive measure, the public has been urged to surrender any fake notes to the police to avoid the risk of being charged for 'passing counterfeit notes.' Recent reports reveal an escalating trend in cryptocurrency-related crimes in Hong Kong, with reported cases surging from 2,336 to 3,415 within a year, resulting in a loss of $553 million.

These illegal activities predominantly involve two main strategies. Scammers often persuade victims to transfer funds to their wallets, a tactic commonly observed in 'pig butchering scams.' Additionally, scammers exploit the hype surrounding cryptocurrencies and the lack of understanding among victims to orchestrate fraudulent schemes. The use of overseas crypto exchanges by scammers further complicates the tracking process according to law enforcement agencies.

The rise in crypto-related crimes has prompted heightened scrutiny in the region. The securities regulator in Hong Kong has introduced a licensing framework for cryptocurrency service providers. Concurrently, Chinese authorities have committed to collaborating with the United Arab Emirates to combat cybercrimes in the cryptocurrency space.