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Hong Kong: Risks Associated With Virtual Currencies Assessed as Medium-Low

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Hong Kong’s government agency, the Financial Services and the Treasury Bureau (FSTB) has released a “Money Laundering and Terrorist Financing Risk Assessment Report”. The publication states that virtual currencies such as Bitcoin don’t pose a serious threat to the country. The report assesses Money Laundering (ML) and Financing of Terrorism (FT) risks in financial institutions, non-financial organizations and payment methods.

Virtual currencies (“VCs”) are virtual commodities not accepted for payment in Hong Kong and have only drawn speculative investment.

Hong Kong has neither banned nor regulated cryptocurrencies, however, tokens which are recognized as securities need to follow the rules set by the Securities and Futures Commission (SFC). It is notable that virtual currencies are not as commonly used in the country as in others. The report notes that even though VCs have been used in pyramid schemes and other criminal activities, none of them are connected to ML or CF trading.

Investigations and intelligence do not suggest VCs were used or intended to be used in other prevalent predicate offences (e.g. drugs, dutiable goods smuggling) or TF. The threat level is low.

There are seven Bitcoin ATMs as well as four online Bitcoin exchanges in Hong Kong. The Hong Kong Police Force (HKPF) keeps an eye on these platforms to ensure that unlawful practices are avoided. Citizens and residents are allowed to partake in crypto projects, however, warnings have been issued regarding the anonymous nature of cryptocurrencies.

Although there is inherent ML/TF vulnerability related to VCs, there does not seem to be any visible impact affecting the overall risk in Hong Kong so far. The risk of VCs is assessed as medium-low.

The government plans on monitoring VCs activities while observing the various regulatory steps taken by the rest of the world. Until then, crypto users in Hong Kong are free to buy / sell cryptocurrencies without worrying about sudden restrictions.

Image Credit: Deposit Photos

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