The Hong Kong government will introduce draft bills to regulate digital assets this year amid skyrocketing ‘crypto’ crime over the past three years, a top official has revealed.
Christopher Hui, the Secretary for Financial Services and the Treasury Bureau (FSTB), revealed that top financial regulators are consulting with the public on digital asset bills that span virtual asset service provider (VASP) licensing, trading, OTC desks, and stablecoin
issuance. He was responding to questions on the government’s handling of digital assets to lawmakers at the Legislative Council.
In February, the FSTB launched a public consultation on the oversight of OTC desks, Hui told lawmakers. The proposals include giving the Commissioner of Customs and Excise jurisdiction over the sector, including license issuance mandate.
Separately, the FSTB has been working with the central bank on legislative proposals for stablecoins. The two launched a public consultation last December that, among others, proposes that all stablecoin issuers obtain a license from the Hong Kong Monetary Authority (HKMA). Only licensed issuers will be allowed to serve Hong Kong investors.
“Subject to the consultation outcomes and progress of the preparatory work, the Government will submit bills on the above licensing regimes to the Legislative Council as soon as practicable,” Hui stated.
While the government acknowledges the need for new legislation, Hui noted that Hong Kong is a global leader in ‘crypto’ regulation.
“In fact, Hong Kong is among the first few jurisdictions to have adopted a comprehensive framework to regulate VA activities from an investor protection perspective,” he told the lawmakers.
However, digital asset-related crime in Hong Kong has skyrocketed over the past three years in stark contrast to the regulatory superiority Hui expressed.
As he revealed, ‘crypto’ crime cases shot up from 1,397 in 2021 to 3,415 last year. Losses to digital asset scammers increased fivefold from $105 million in 2021 to $562 million in 2023.
Despite the worrying numbers, Hui told the lawmakers that police have arrested hundreds of suspects and have been cooperating with other authorities to crack down on ‘crypto’ crime.
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