Hong Kong seeks to tighten regulations around cash-for-crypto shops following the JPEX virtual asset platform scandal that flashed gaps in Hong Kong’s crypto regulation system.
According to Louise Ho Pui-shan, commissioner of the Customs and Excise Department in Hong Kong, international cooperation to crack down on money launderers benefiting from the anonymity of cryptocurrency transactions is much sought in the nation. Although it remains unclear whether the agency itself would tackle such issues, Hong Kong must urgently address the money-laundering risks loitering around cash-for-crypto shops.
The Crackdown On OTC Crypto Exchanges
The Customs and Excise Department’s ambit encompasses all the regular money exchanges in the city, however, over-the-counter (OTC) cryptocurrency exchanges do not come under the same purview and are not subject to any licensing or regulatory regime.
The owners of such OTC cryptocurrency exchanges were among the 28 people who were arrested by the police following the JPEX cryptocurrency exchange scam. While the Securities and Futures Commission evoked JPEX’s investment offerings as “too good to be true,” some OTC cryptocurrency exchanges prompted the same offerings.
Ho emphasized the importance of reviewing governance options for these OTC crypto exchanges by the authorities in alignment with the recent fallout from the JPEX scandal. According to Ho, the regulation of these OTC crypto exchanges revolves around two main aspects.
These aspects include combating money laundering and terrorist financing, and investor protection. He believes that improving such a regulatory regime is only possible when both aspects are taken into consideration. However, it remains unclear whether the Customs and Excise Department will be involved in the process.
Hong Kong Explores Overseas Collaboration
As the global FinTech realm is proliferating, there has been a substantial increase in the transactions revolving around virtual assets. These transactions can be easily used by criminals for various illicit activities as these transactions can’t be traced back and are also not restricted by time and location.
The Customs and Excise Department of Hong Kong now plans to step up the game by setting up cross-border collaborations to jack up the tightening of regulations that orbit around these OTC crypto exchanges. Later this month, the department has also set its sights on signing a memorandum of cooperation with its counterpart in South Korea. The new collaboration aims to reinforce intelligence sharing as a part of the crackdown on money laundering.