Crypto
Hong Kong’s Successful Approach To Cryptocurrency Regulation
.jpg?ssl=1 "Hong Kong’s Successful Approach To Cryptocurrency Regulation")
A number of measures show that Hong Kong is determined to foster a “vibrant ecosystem” for virtual assets and other related products.
Jill Wong, partner at law firm Reed Smith, writes about
how Hong Kong tackles regulating cryptocurrencies, a task
which involves judging how to balance innovation against
risk.
The editors are pleased to share these views and invites
readers’ responses. The usual editorial disclaimers apply. Email
tom.burroughes@wealthbriefing.com
Like many other jurisdictions, the initial response in Hong Kong
to the advent of bitcoin and other cryptocurrencies was to ask:
“what is this?” This has since evolved, although in the
initial stages of regulatory thinking virtual assets (VAs) were
regulated only to the extent that they fitted into existing laws
governing financial services. For example, VAs that resemble
traditional securities were treated as ‘securities’ or “futures
contracts’ under existing securities laws, and were subject
to the licensing, marketing and other requirements under Hong
Kong law.
However, as these laws were not formulated with VAs in mind,
there were VAs that did not fit neatly into traditional
definitions and so fell outside the regulatory net. The
securities regulator, the Hong Kong Securities and Futures
Commission (SFC), took steps to address this in the form of
public statements, warning the public that VAs, such as
cryptocurrencies, needed to be licensed. For instance, Initial
Coin Offerings could be seen as “collective investment
schemes,” and therefore required a licence under the
Securities and Futures Ordinance (SFO), whilst bitcoin futures
also required a licence under the SFO as “futures contracts.”
Matters accelerated in 2018 when the SFC expanded its regulatory
oversight to cover existing SFC licensees who were portfolio
managers and distributors of VA funds. This was a significant
step in bringing greater oversight and stability to the VA
ecosystem.
The SFC issued a position paper in 2019, outlining a new
framework for regulating centralised VA trading
platforms (VATPs). VATPs that provide trading services in both
non-security VAs and security VAs would fall within the
regulatory net of the SFC. However, a loophole existed: VATPs
that only dealt with non-security VAs remained unregulated.
This was soon dealt with. In June 2023, after extensive
consultation, Hong Kong enacted a comprehensive licensing regime
for VATPs. Under this regime, VATPs performing activities in
non-security VAs are required to obtain a VATP licence under the
Anti-Money Laundering and Counter-Terrorist Financing Ordinance
(AMLO).
The current position and outlook
Hong Kong has ambitions to be a VA hub. It is already moving in
the right direction, with the UN Trade & Development Report in
2023 ranking Hong Kong ninth in the world in terms of its
preparedness for frontier technologies. Hong Kong’s commitment to
innovation (while giving due protection to investors) and a
crypto-friendly legal framework have also positioned the
territory as a global leader in the VA space.
Hong Kong regulators continue to supplement the current framework
for VAs. This includes introducing licensing regimes for issuers
of fiat-referenced stablecoins and over-the-counter trading in
VAs. The regulators have already completed public consultations
on these regulatory proposals and plan to introduce the relevant
legislation soon.
Hong Kong also became the first jurisdiction in Asia to offer
retail investors the ability to trade spot bitcoin and Ether
ETFs, pioneering an in-kind redemption mechanism. This provided
investors with additional flexibility to buy and sell shares of
crypto tokens with a portfolio of securities, financial
derivative instruments or VAs instead of cash.
This is a pivotal move to integrate VAs into mainstream financial
products in Hong Kong. The inclusion of Ether also opens the door
for new ETFs tracking other major cryptocurrencies. This will
further diversify the offerings of exchange-traded products in
Hong Kong which now include a metaverse ETF, a blockchain
ETF and some VA futures ETFs.
Hong Kong is also investing heavily in fintech, a key driver for
the city’s competitive advantage. For example, the Hong Kong
government has commissioned the Hong Kong Monetary Authority
(HKMA) to subsidise training costs for eligible practitioners in
the finance sector under the Fintech Subsidy Scheme.
The latest 2023 “Fintech Promotion Roadmap” outlined five key
pillars for development, emphasising the adoption of fintech
solutions across Hong Kong’s banking industry, expanding the
fintech-savvy workforce, and enhancing data infrastructure.
At the same time, the HKMA’s exploration of a retail Central Bank
Digital Currency, the e-HKD, reflects the regulator’s commitment
to staying at the forefront of digital currency innovation.
Earlier this year, the HKMA launched a stablecoin
“sandbox.” This allows prospective issuers to conduct
experiments under relaxed regulatory settings and will facilitate
dialogue between the issuers and regulators. A high-profile
example is a fintech firm, founded by a former senior regulator,
actively working on a Hong Kong dollar-backed stablecoin,
partnering with prominent players in the digital payments and VA
sectors to explore the use of its stablecoin in retail and
cross-border payments.
Legal advantages?
Hong Kong’s legal system also provides a favourable environment
for the VA industry. Cryptocurrencies have been recognised by
Hong Kong courts as ‘property’ which can be the subject of a
trust in a liquidation context. The courts have also granted
freezing injunctions over cryptocurrencies as asset preservation
measures. These rulings provide welcome certainty for traders and
investors.
That said, while Hong Kong can be viewed as a crypto-friendly
jurisdiction, it is not an “easy” jurisdiction for regulatory
arbitrage. The current VATP licensing regime is stringent and
robust (some argue too stringent). The existing licensing regime
sets out detailed criteria for applicants’ financial resources,
management and governance structure, VA token admission
requirements, client assets custody, and anti-money laundering
and counter-terrorist financing policies.
The SFC has also reiterated that VATPs cannot serve mainland
Chinese residents. These exacting requirements and the lack of
access to mainland customers may have prompted several major
exchange players to withdraw their VATP licence applications.
However, a robust regulatory regime is arguably a necessary
foundation for sustainable growth. It gives credibility to
businesses that commit to compliance and boosts investor
confidence. This would explain the undiminished interest in Hong
Kong amongst the 17 would-be VATPs waiting to be licensed.
Is Hong Kong edging out the competition?
Traditional financial institutions interested in VA distribution
or fund management should be encouraged by recent moves by the
HKMA and SFC. In December 2023, the HKMA and SFC issued the third
joint circular on intermediaries dealing with VAs, expanding the
way for brokers, advisors and fund managers to provide VA-related
services.
There are additional guardrails for investor protection: most
VA-related products are likely to be considered as complex
products and, except in limited circumstances, distributors will
therefore need to comply with existing requirements for sales of
complex products. This includes a suitability assessment of the
VA-related product for the investors.
Only professional investors would have access to these
products. However, there are some options for retail
investors because they can trade VA-related products that are
traded on the Hong Kong Stock Exchange and some other specified
exchanges and the VA funds that are authorised by the SFC for
public offering. This should be a major boost to the VA markets
in Hong Kong.
In addition, the SFC has already greenlighted 25 funds allowing
them to have portfolios that invest more than 10 per cent in VAs.
Traditional banks and securities brokers can also offer VA
dealing services through partnerships with SFC-licensed VATPs.
Several securities brokers have already obtained the go-ahead
from the SFC and, whilst there are currently only two licensed
VATPs, there are likely to be more in future.
These measures demonstrate Hong Kong’s determination to foster a
vibrant ecosystem for VAs, innovative products, and those
that distribute, manage and invest in them. The global
marketplace is competitive, but Hong Kong has positioned itself
at the forefront of this global market and is well-placed to reap
the rewards in the coming years.
Disclaimer: This is for information only and is not
legal advice.
The Delaware House of Representatives has passed a bill that would prohibit the operation of cryptocurrency ATMs across the state, citing growing concerns over fraud and consumer protection. The legislation, now headed to the state Senate for consideration, would require all existing crypto ATMs to be shut down and removed within 90 days of enactment.
What the Bill Proposes
House Bill 123, as reported by Decrypt, targets the proliferation of cryptocurrency kiosks that have become common in convenience stores, gas stations, and other retail locations. Lawmakers argue that these machines are increasingly used to facilitate scams, particularly targeting elderly and vulnerable residents who may not fully understand the technology. The bill would make it illegal to operate, maintain, or permit the installation of a cryptocurrency ATM anywhere in Delaware.
Why This Matters for Consumers
Cryptocurrency ATMs allow users to buy or sell digital currencies like Bitcoin using cash or debit cards. While legitimate users appreciate the convenience, regulators have flagged them as high-risk for money laundering and fraud. The Federal Trade Commission has reported a surge in scams where victims are directed to deposit cash into these machines under false pretenses. Delaware’s proposed ban reflects a broader state-level push to rein in unregulated crypto financial services.
Similar Actions in Other States
Delaware is not alone in taking a hard line. Indiana, Tennessee, and Minnesota have previously enacted comparable restrictions or outright bans on crypto ATMs. These measures often include licensing requirements, transaction limits, and mandatory disclosures. The trend signals a growing skepticism among state legislators about the consumer safety risks posed by unmonitored crypto kiosks.
What Happens Next
The bill now moves to the Delaware State Senate, where it will undergo committee review and potential amendments. If passed, Delaware would join a small but growing list of states with explicit bans. Industry advocates argue that such laws could stifle innovation and push transactions underground, while consumer protection groups praise the move as necessary to prevent financial harm.
Conclusion
Delaware’s legislative action highlights the ongoing tension between cryptocurrency adoption and consumer safety. As the bill advances, stakeholders on both sides will be watching closely. For now, the message from Dover is clear: protecting residents from crypto-related fraud is a priority that may outweigh the benefits of unregulated ATM access.
FAQs
Q1: What is a cryptocurrency ATM?
A cryptocurrency ATM is a kiosk that allows users to buy or sell digital currencies like Bitcoin using cash, debit cards, or other payment methods. Unlike traditional ATMs, they are not connected to a bank account.
Q2: Why does Delaware want to ban crypto ATMs?
Lawmakers cite a rise in fraud cases, especially among seniors, where scammers trick victims into depositing cash into these machines. The bill aims to eliminate this vector for financial exploitation.
Q3: What happens to existing crypto ATMs in Delaware if the bill becomes law?
Operators would have 90 days to shut down and remove all machines. Failure to comply could result in penalties. The timeline is designed to give businesses a reasonable window to adjust.
Key Takeaways
Word Play With a Warning
Robert Kiyosaki, the author of the best-selling personal finance book “Rich Dad Poor Dad,” is recasting a familiar piece of investing advice. In a post on X, he argued that many investors only believe they are protected, adding:
“De-Worse-ified means they think they are diversified, but they have all their diversified assets, such as gold, silver, Bitcoin, stocks, bonds, real estate, and oil, in one asset class.”
His point is that spreading money across many holdings does not help if those holdings all move the same way in a crisis. When a liquidity shock hits, correlations rise and supposedly diverse portfolios can fall in unison, leaving investors “de-worsified” rather than diversified.
The commentary is consistent with the stance Kiyosaki has pushed throughout 2026 as he recently named bitcoin among the safest investments for the year, grouping it with what he calls real assets. He has repeatedly listed gold, silver, oil, food, bitcoin, and ether as his preferred holdings, framing them as scarce stores of value that printed money cannot dilute.
He has paired that view with stark price calls, setting a target of $250,000 for BTC by year’s end alongside a longer-term goal of $1 million. At current levels, the move would require a gain of more than 230%. On the precious metals side of things, he recently suggested a possible $200-per-ounce silver level this year, calling the metal’s climb a signal of mounting financial stress.
Kiyosaki’s broader thesis is darker still, warning investors of a historic market crash that he ties to surging global debt and fragile private credit markets, urging followers to build income streams, learn trade skills, and accumulate hard assets before the storm.
Timing Is Everything
The “de-worsified” warning arrives at a tense moment for markets, especially as bitcoin posted its worst week since the 2022 collapse of Sam Bankman-Fried’s FTX exchange, sliding below $60,000 as record exchange-traded fund (ETF) outflows and risk-off sentiment gripped the sector.
That is exactly the kind of broad drawdown scenario (where bitcoin, equities, and other assets fall together) that Kiyosaki has used time and again to illustrate his point.
That said, he has become an increasingly polarizing voice within the broader economic landscape, with skeptics pointing out that his crash predictions are frequent and his price targets aggressive (and that he has issued similar warnings for years). Supporters argue his core message of owning scarce assets, avoiding hidden correlation, and preparing for volatility is a reasonable hedge against an era of heavy money printing and rising debt.
Whether or not his $250,000 bitcoin call lands, the distinction he is drawing is a real one, as true diversification really does depend on owning assets that behave differently (not simply owning many of them). In a market where everything from gold to crypto to stocks can move on the same macro headlines, that lesson may matter more than any single forecast.
North Carolina lawmakers on Tuesday advanced a bill to protect consumers from cryptocurrency kiosk fraud.
House Bill 920, which passed the House with a 115-to-0 vote, aims to regulate an industry that its author claims is unregulated in the state.
“It’s the wild, wild West,” Rep. Neal Jackson, R-Moore, said during a committee discussion on Tuesday. “There is no regulation whatsoever in North Carolina. That’s what we’re trying to do here.”
Lawmakers cited a growing amount of fraud as the reason for the bill. About $389 million in losses were reported last year through cryptocurrency ATMs, a 58% increase from 2024, according to the FBI. The majority of those impacted are 60-plus.
The bill now goes to the Senate for consideration. It seeks to:
- Require licenses for all kiosk operators under the Money Transmissions Act.
- Place operators under the supervision of the Commissioner of Banks.
- Require fraud warnings and transaction receipts for every transaction.
- Require compliance and consumer protection officers that are always available.
It also seeks to place limitations on transactions in an effort to reduce fraud, requiring a $2,000 daily limit for the first 30 days for new customers and a $5,000 daily limit for existing customers, who would qualify after 30 days.
While other states have service fees between 20% and 30%, Jackson suggests putting a cap at 14%.
State Rep. Tim Longest, D-Wake, expressed concern about having the kiosks at all in the state. He said the bill’s protections could be stronger.
“These machines can be the subject of fraud, basically facilitating fraud on seniors and other vulnerable individuals and in those cases,” Longest said. “… In crafting regulations, I think it’s important that we ensure consumers are adequately protected by those regulations and I do not believe that, under the language of the bill currently before you, those regulations are sufficient to protect consumers.”
Jackson pointed to this bill as an effort to regulate, not shut down, cryptocurrency kiosks in the state and said there are even more consumer protections in place.
David N. Tente, the executive director of the ATM Industry Association, said the bill — and others like it — is problematic because it requires operators to provide refunds to fraud victims in certain instances.
“In most cases, the cash in the ATM/kiosk does not belong to the operator, which means that returning any of it would be, technically, theft,” Tente said. “If you give someone cash for something, and you change your mind after they leave, you probably won’t get it back.”
He added: “We certainly feel sorry for those being scammed, but there are very simple things you can do to avoid it.”
Tente said these kinds of scams have existed for centuries, adding: “They are still here — just using different means of payment.”
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