Significant Increase in Crypto Fraud
The Hong Kong police have officially reported a notable surge in cryptocurrency-related fraudulent activities during the period between 2022 and 2023.
Hong Kong has emerged as a favored destination for cryptocurrency trading since mid-2023, benefiting from a well-established regulatory framework, which sets it apart from mainland China where cryptocurrency trading has been prohibited since December 2021.
The data provided by the Hong Kong police indicates a significant rise in crimes involving virtual assets. The number of cases increased substantially from 2,336 in 2022 to over 3,415 in 2023, totaling HK$4.3 billion, with more than 90% of these cases being fraud-related.
Although Hong Kong is under Chinese jurisdiction, its stance on cryptocurrency exhibits a more supportive stance compared to mainland China. Chinese government bodies are even endorsing the adoption of cryptocurrencies within the region.
Surge in Fraud Cases
According to Hong Kong police data on July 1, the number of cryptocurrency-related crimes spiked from 2,336 cases in 2022 to over 3,415 cases in 2023, amounting to HK$4.33 billion. A vast majority of these cases, surpassing 90%, were classified as fraud cases.
The disclosed details highlight two primary forms of fraud carried out by scammers using virtual asset service platforms:
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Anonymous Wallet Scams: Scammers dupe victims into transferring cryptocurrency to anonymous wallets, challenging law enforcement's efforts to track identities due to the absence of centralized control.
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Overseas Platform Scams: Fraudsters leverage overseas platforms that fall under Hong Kong's regulation, complicating the police's pursuit to trace and halt illicit fund movements.
Regulatory Response
Hong Kong authorities are actively implementing stringent measures to bolster regulations and reinforce oversight in response to the escalating incidents of crypto-related scams. By permitting only compliant and reputable exchanges to function within its jurisdiction, the city aims to boost investor confidence and shield the financial ecosystem from fraudulent schemes.
Hong Kong Poised to Approve 11 Crypto Exchanges
As per a report by Bloomberg, Hong Kong's securities regulator has revealed that 11 cryptocurrency exchanges are nearing the acquisition of licenses, a year subsequent to the instatement of a digital-asset governance framework intended to cultivate an industry hub. Noteworthy applicants such as Crypto.com and Bullish are close to being formally licensed.
Strategic Ambitions to Become a Crypto Hub
In a bid to transform into a virtual asset hub, Hong Kong initiated this shift in late 2022 as part of broader endeavors to rejuvenate its financial hub status in the aftermath of political turmoil. The city's crypto-oriented initiatives encompass the expansion of licensed exchanges, the introduction of spot Bitcoin and Ether exchange-traded funds (ETFs), and the formulation of frameworks for stablecoins and digital bond issuance via tokenization platforms.
Hong Kong faces stiff competition from Dubai and Singapore in its aspiration to evolve into a premier digital asset center. The city's stringent regulatory structure is geared towards augmenting investor security and mitigating the risks of money laundering and terrorism financing, albeit imposing notable compliance costs.
At present, HashKey exchange and OSL Group have secured full licensing, while approximately two dozen entities have submitted applications to operate crypto exchanges by the deadline on Feb. 29.
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