Hong Kong counsels seek better crypto protections
The growing popularity of cryptocurrency is creating new challenges for regulators around the world. One area in particular that has garnered attention is how best to protect investors against theft or fraud in the crypto market. In Hong Kong, several counsels are calling for improved protections for investors in the crypto market.
At the heart of the issue is the fact that cryptocurrency is not well-regulated in many areas of the world. This has led to a surge in ICOs (Initial Coin Offerings) that can be open to fraudulent activity. Many investors have lost money due to scams where they unwittingly invested in fake projects.
To combat this trend, several prominent figures in Hong Kong have called for stricter regulations regarding ICOs and cryptocurrency in general. Among these voices is Senior Counsel at Des Voeux Chambers, Anson Wong. Wong is a recognized legal expert in this field, and he has spoken out frequently on the need for better protections.
Wong has argued that many ICOs are structured in a way that makes them difficult for investors to assess. The tokens are often sold without any underlying assets or solid business models, which makes the investment highly speculative. This has lead to many high-profile scams where investors lost significant sums of money.
Wong therefore advocates for a more robust regulatory framework that would better protect investors. In particular, he calls for more transparency in the selling of tokens, more stringent due diligence on projects, and better oversight of exchanges.
Other counsels, including Senior Counsel Kevin Egan of Temple Chambers, have voiced similar concerns. Egan has also highlighted the need for better regulation to prevent fraud and protect investors.
One area of focus for the counsels has been the regulation of exchanges. These are the platforms where cryptocurrencies are traded, and they are often seen as a weak link in the chain of investor protections. There have been many high-profile hacks of exchanges in recent years, which have resulted in the theft of large amounts of cryptocurrency.
To address this problem, the counsels have called for greater regulation of exchanges. They argue that exchanges should be required to comply with best practices for cybersecurity, as well as to maintain sufficient reserves to make investors whole in the event of a hack.
The counsels have also called for greater collaboration between regulators across different countries. As cryptocurrency is a global phenomenon, it requires a coordinated response from regulators around the world. The counsels believe that by working together, regulators can develop best practices and share information that will help to prevent fraud and protect investors.
It is clear that the counsels in Hong Kong are passionate about ensuring that investors are properly protected in the crypto market. They recognize that the current regulatory environment is insufficient, and that there is an urgent need for more robust protections. By working together, these legal experts hope to develop a framework that will better safeguard investors in the future.
Hong Kong’s booming crypto scene has attracted scammers, and lawyers are now needed to combat fraud in the sector. Reynolds Porter Chamberlain Partner, Jonathan Crompton, recently advised a medical professional who lost a substantial amount of money through a fake crypto exchange set up by fraudsters. Scammers are using phone numbers with a Hong Kong prefix to strike up virtual friendships with victims, gain their trust, and persuade them to deposit funds into accounts on fake cryptocurrency exchanges. They then convince victims to persuade their friends and family to deposit money with the fake platform too, before ultimately disappearing. In Hong Kong there were 2,336 crypto-related scams in 2022, up 67% from the previous year, according to police data. Lawyers are helping the Securities and Futures Commission navigate the delicate balance between protecting investors while giving crypto groups enough freedom to drive interest in the sector. Lawyers, such as Crompton, are also attempting to help victims recover their stolen assets, a particularly challenging task because digital wallets used to store defrauded cryptocurrency are usually anonymous and exchanges often fail to respond to legal letters. Crompton has suggested that victims could pool their assets to create joint entities and share any winnings from recovery proceedings. Gary Tiu, Head of Regulatory Affairs at BC Technology Group, the parent firm of OSL, one of just two crypto exchanges licensed by Hong Kong’s financial regulator, hopes that Hong Kong’s crypto push will encourage more investors to use licensed platforms rather than unlicensed ones that lack regulatory scrutiny, but Tiu is also concerned that the sheer volume of publicly available information about licensed exchanges will provide an opportunity for scammers. In September 2022, Crompton became a founding committee member of Hong Kong’s Crypto Fraud and Asset Recovery Network, which brings together experts from law, accountancy, and multiple industry players to raise awareness of crypto fraud in Asia. The service also aims to help victims of fraud recover their lost assets.
