Background to the establishment of the association
In view of the recent incidents in Hong Kong where massive amount of OTC cryptocurrency exchange shops have illegitimately promoted unlicensed virtual asset exchanges, defrauding or attempting to defraud more than thousands of citizens, we as a leading practitioner in the OTC industry, believe it is necessary for us to take a step, lead the industry, gather the industry practitioners, regulate the industry, to prevent similar incidents from happening and orderly moving Hong Kong into a global asset trading center.
Cryptocurrency can be transferred across jurisdictions fast and anonymously. Due to these transcending-space-and-time and anonymous characteristics, and Hong Kong's status as a global financial center with free flow of capital, the number of crimes related to cryptocurrencies in the city has been rising every year for more than a decade. Crimes proceeds were dissipated and laundered using cryptocurrencies. The increase of crime rates then further catalysed and aggravated various social problems, causing social loss at an unprecedented level.
In the long run, Hong Kong needs a more sophisticated framework to regulate OTC cryptocurrency exchange shops.
A multi-dimensional and multi-pronged approach is needed, including governance framework, legal framework, preventive measures, and enforcement measures etc. Within the framework, aspects of communication, collaboration, supervision, punishment and correction etc. all need to be improved. Using high technology technique at different stages of crime is also crucial. Technology has to be applied at all stages, including crime prevention, crimes combating, law enforcement, arrest and detention, evidence collection, crime proceeds tracking, and crime proceeds recovery, etc.
Criminals utilize services provided by OTC cryptocurrency exchange shops under the below circumstances.
(1) Converting the defrauded legal tender into cryptocurrency,
(2) Converting the defrauded cryptocurrency into legal tender,
(3) Hiding the defrauded cryptocurrency followed by directly using, etc.
Therefore, the role of OTC cryptocurrency exchange shops in all stages of crimes is very important.
To support Hong Kong in becoming the world's leading virtual asset trading hub and effectively preventing criminals from exploiting Hong Kong's free entry-and-exit of capital and the borderless nature of cryptocurrency to carry out money laundering activities, we believe that Hong Kong should establish a regulatory framework as early as possible. This ensures the continuingly healthy development of the industry and improves the quality of the compliance technology requirements for practitioners.
Therefore, we hope to take the lead in establishing an OTC industry association for practitioners to join. We shall set a series of standards, submit effective crime prevention suggestions to government departments, and jointly improve the industry's compliance level while effectively protect the common interests of the industry. We shall shoulder the responsibility to achieve win-win for all sectors of society.