Hong Kong Report Grade Bitcoin as Low Risk in Financial Crime

April 30, The Financial Services and Treasury Bureau (FSTB) in Hong Kong has released its Money Laundering and Terrorist Financing Risk Assessment Report. The report concluded that bitcoin is not particularly involved in any type of financial crime, however, the anonymous trading of some kinds of virtual currencies essentially constitutes the potential risk of money laundering and terrorist financing. The Hong Kong Police Force and the customs will closely monitor four Hong Kong-based bitcoin trading platforms.

The FSTB’s report stresses that cryptocurrencies are not considered as legal tender in Hong Kong and the Money Service Operator (MSO) licenses only need to be obtained for money services conducted in fiat currencies. Thus, there is no specific regulation exits around cryptocurrency trading.

There are seven bitcoin ATM machines in Hong Kong, located in five different places. However, Neither the buyer nor the seller are identified and the tradings take place in these ATM machines cannot be traced.

Four exchanges are active in Hong Kong but though the report suggests that ‘none of them are popularly used by people in Hong Kong’. The Hong Kong Police Force and the customs do closely monitor bitcoin ATMs and exchanges as a part of their work to fight against money laundering and terrorist financing.

The report also emphasized that they see “no apparent sign of organized crime or ML/TF concerning trading of cryptocurrencies” and the FSTB has concluded that “there does not seem to be any visible impact affecting the overall risk in Hong Kong so far and the risk is assessed as medium-low”.

However, cryptocurrencies have been used as a tool in Ponzi schemes and cybercrimes. Hong Kong police have received 167 bitcoin-related reports from 2013-2017. Most of which related to ransomware, specifically mentioned the WannaCry attack while drug or smuggling offences are not involved.

According to the government’s risk assessment, ‘Stored Value Facilities’ (SVFs) which applied in Paypal, Wechat Pay and Alipay are far higher than cryptocurrency trading. This is because cryptocurrencies are not popularly used by people in Hong Kong and the report conclude ‘the use of bitcoin remains at a negligible level.’

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