Significant Increase in Crypto Fraud
Hong Kong police have officially disclosed a significant increase in cryptocurrency-related fraud activities between 2022 and 2023.
Since mid-2023, Hong Kong has become a favorable location for cryptocurrency trading, supported by a systematic regulatory framework. This distinguishes it from mainland China, where all crypto trading has been banned since December 2021.
Despite being part of China, Hong Kong’s approach to cryptocurrency is notably more supportive, with Chinese government agencies backing crypto adoption in the region.
Surge in Fraud Cases
On July 1, according to data from Hong Kong police, crimes involving cryptocurrencies surged from 2,336 cases in 2022 to over 3,415 cases in 2023, amounting to HK$4.33 billion (about $553 million). Over 90% of these were fraud cases.
The disclosed information highlights two primary types of virtual asset service platform fraud used by scammers:
- Anonymous Wallet Scams: Fraudsters deceive victims into sending cryptocurrency to anonymous wallets, making it difficult for the police to trace identities due to the lack of central control.
- Overseas Platform Scams: Fraudsters use overseas platforms regulated by Hong Kong, complicating the tracking and stopping of illicit funds by the police.
Regulatory Response
Hong Kong authorities are taking significant steps to tighten regulations and enhance oversight to combat the rise in crypto-related scams. By ensuring that only compliant and reputable exchanges operate within its jurisdiction, the city aims to bolster investor confidence and safeguard the financial ecosystem from fraudulent activities.
Hong Kong Poised to Approve 11 Crypto Exchanges
Per a Bloomberg report, Hong Kong’s securities regulator said 11 cryptocurrency exchanges are closer to obtaining licenses, a year after implementing a digital-asset rulebook aimed at fostering a hub for the industry. Applicants, including Crypto.com and Bullish, are “deemed to be licensed.”
Strategic Ambitions to Become a Crypto Hub
Hong Kong’s shift towards becoming a virtual asset hub began in late 2022 as part of broader efforts to restore its status as a financial center following political unrest. The city’s crypto initiatives include expanding licensed exchanges, introducing spot Bitcoin and Ether exchange-traded funds (ETFs), and developing frameworks for stablecoins and digital bond issuance on tokenization platforms.
Hong Kong faces competition from Dubai and Singapore in its bid to become a leading digital asset center. The city’s strict regulatory framework aims to enhance investor protection and prevent money laundering and terrorism financing, though it also imposes significant compliance costs.
Currently, HashKey exchange and OSL Group have fully obtained licenses, and around two dozen companies have applied to operate crypto exchanges by the Feb. 29 deadline.
