Hong Kong sees surge in virtual asset crimes amid regulatory challenges

Hong Kong has witnessed a sharp increase in the number of crimes involving virtual assets, such as cryptocurrencies, in the past three years, according to the latest figures from the government.

From 2021 to 2023, the total number of cases rose from 1,397 to 3,415, while the amount involved soared from HK$824 million to HK$4.398 billion, the Treasury Bureau revealed in a written reply to lawmakers on Tuesday.

The bureau also said that the police had arrested 70 people in connection with the JPEX case, a suspected fraud involving a virtual asset trading platform that allegedly lured investors with high returns. No one has been charged yet.

The JPEX case is one of the many examples of how virtual asset crimes pose a serious threat to the financial security and stability of Hong Kong, a global financial hub.

The Treasury Bureau said that the Securities and Futures Commission (SFC) and the police had exchanged intelligence on more than 100 virtual asset trading platforms or related activities as of February 2 this year.

The SFC and the police will decide whether to launch a special investigation into complaints about individual platforms and activities based on various factors, such as the connection with Hong Kong, the violation of relevant laws, the number of people involved and the amount involved, the bureau said.

The bureau also said that the government was working to improve the regulatory framework for virtual assets, which are currently not subject to the same level of oversight as traditional financial products and services.

The bureau launched a public consultation on February 8 this year on a legislative proposal to establish a licensing system for virtual asset over-the-counter trading service providers, which are currently unregulated. The consultation period will last until April 12.

In addition, the bureau and the Hong Kong Monetary Authority jointly launched a public consultation in December last year on the supervision of stable coin issuers, which are entities that issue virtual assets pegged to fiat currencies or other assets. The consultation period ended on February 29 this year.

The bureau said that depending on the results of the consultations and the progress of the preparatory work, the government would submit a bill on the licensing system to the Legislative Council as soon as possible.

The bureau stressed that the government was committed to enhancing the protection of investors and consumers, as well as maintaining the integrity and reputation of Hong Kong’s financial system, in the face of the emerging and evolving challenges posed by virtual assets.

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