• Hong Kong is attempting to reclaim its status as a cryptocurrency powerhouse.
• Hong Kong is deciding on specific fines and prison terms for breaking the law.
• In recent months, cybercriminals have flocked to Hong Kong.

Global legislators have frequently criticised cryptocurrencies for being used as a tool to facilitate anonymous money laundering operations. Hong Kong, which just became the country with the best crypto infrastructure in the world, has taken preemptive measures to prevent the illegal use of cryptocurrency assets for the transfer of illicit funds.

The Anti-Money Laundering (AML) and Counter-Terrorist Financing (Amendment) Bill 2022 in Hong Kong has been modified to now also cover cryptocurrency transactions. Currently, Hong Kong is attempting to control internal crypto-related activity. According to the modified bill, companies that facilitate cryptocurrency trades and payments must obtain a licence. 

The businesses will need to demonstrate that they are in conformity with Hong Kong's AML regulations in order to obtain this licence. The aforementioned modification will go into effect on June 1, 2023, giving enough time for preparations. The banking industry will shortly be consulted by the Hong Kong Monetary Authority for corresponding revisions to the rules regarding current issues. 

According to a report by Wu Blockchain, violating the rules could result in fines of up to $5 million (approximately Rs. 40 crore) and up to seven years in jail for virtual asset service providers (VASPs).

The revised rules also tighten the noose around cryptocurrency advertisers who might be putting people at risk of financial harm by endorsing illegal projects and assets. According to Triple-A figures, in 2021 there were over 245,000 cryptocurrency owners in Hong Kong. According to Forex's most recent 'Worldwide Crypto Readiness Report,' Hong Kong is the nation that is most prepared for cryptocurrencies. 

In terms of being profitable for the cryptocurrency sector, Hong Kong had an index score of 8.6 out of 10. Hackers and con artists have been drawn to Hong Kong this year due to the cryptocurrency industry's rapid expansion.

In the first half of this year, crypto frauds have increased by 105% in Hong Kong. The Hong Kong crypto community has collectively lost $50 million (or around Rs. 400 crore) to scammers between January and July 2022.