Hong Kong’s Commissioner of Customs and Excise, Louise Ho Pui-shan, has called for increased oversight and regulatory measures in response to mounting money-laundering risks within the crypto sector.
This call to action comes amid the HK$1.5 billion ($191 million) JPEX scandal that exposed regulatory gaps in the city’s oversight of crypto exchanges.
The JPEX cryptocurrency scandal, which unfolded in October 2023, exposed vulnerabilities in Hong Kong’s existing regulatory framework for virtual asset platforms.
The fallout from this event has prompted a review of governance options for businesses that facilitate the exchange of cash for cryptocurrencies, commonly referred to as cash-for-crypto shops.
Costumes Chief Stresses on Regulating Crypto Exchanges
Hong Kong’s Customs Chief Ho stressed on the importance of addressing two fundamental aspects of regulating these over-the-counter (OTC) exchange shops, South China Morning Post reported.
The first involves combating money laundering and preventing the financing of terrorism, a concern amplified by the anonymity that cryptocurrencies can provide.
The second aspect revolves around safeguarding investors’ interests, particularly in light of the JPEX scandal, where some OTC shops actively promoted questionable investment offerings described as “too good to be true” by the Securities and Futures Commission.
Commissioner Ho’s stance on the need for a comprehensive regulatory review has garnered attention and raised hopes that the Customs and Excise Department, which oversees regular money changers in the city, might extend its purview to include OTC cryptocurrency exchanges.
However, the Commissioner remained cautious about divulging specifics and instead emphasized that relevant authorities and regulatory agencies were currently evaluating potential governance options.
Hong Kong Witnesses Surge in Crypto Related Money Laundering Cases
Hong Kong has recently witnessed a surge in money-laundering cases linked to cryptocurrency, particularly in the context of large-scale schemes.
This growing trend has ignited concerns over the capacity of existing regulations to effectively counter illicit activities taking advantage of the anonymity inherent in crypto transactions.
Commissioner Ho also stressed the importance of international cooperation in addressing the issue of money laundering within the cryptocurrency sphere.
Recognizing that money launderers often exploit the global nature of digital currencies to evade detection, Hong Kong is actively enhancing collaboration with international counterparts to counter this transnational challenge effectively.
As reported earlier, the JPEX scandal in Hong Kong has shaken the trust of retail investors in crypto with 41% of people not looking to own crypto.