The consultants mentioned the town had gathered regulation enforcement expertise when it got here to cryptocurrencies, to some extent the place authorities might simply hint money-laundering actions that used such digital property.
Joshua Chu Kiu-wah, a lawyer specialising in expertise disputes and cybersecurity, mentioned the main target must be much less on new legal guidelines and laws for the reason that digital property had been already coated, and the important thing was “extra about figuring out learn how to apply current guidelines”.
Veteran cryptocurrency investor Louis Li Sze-chung, who can also be an adviser to native tech start-up affiliation 852Web3, in the meantime, mentioned the demand for a ransom in cryptocurrency throughout the thwarted kidnapping earlier this month.
After the boy was snatched from the Tseung Kwan O Plaza buying centre, his elder sister acquired a ransom notice demanding 660,000 Tether cash price greater than HK$5.1 million.
Li mentioned the stablecoin, additionally known as USDT, might simply be intercepted.
“USDT is issued by an organization, which converts US {dollars} into cryptocurrency. It’s a bit like how Octopus works really. You set down money for digital forex,” he mentioned.
“When crimes occur, it’s potential to ask the corporate to assist freeze and even destroy cash held in sure accounts.”
Stablecoins are a sort of digital forex that pegs their worth to a different forex in fiat cash or a commodity, which is all operated by an organization.
Final November, Tether’s platform voluntarily froze US$225 million price of USDT cash after the USA Secret Service warned the sum was linked to a human-trafficking syndicate conducting pig-butchering scams, the place victims are swindled out of cash with guarantees of romance and monetary rewards, in Southeast Asia.
Expertise lawyer Chu mentioned freezing a Tether account may very well be carried out inside someday, whereas conventional financial institution accounts might take months because the transfer required a choose’s approval, except the case certified for an pressing court docket order.
Chu and Li mentioned suspicious account house owners may very well be recognized once they opted to transform their digital property into money.
“This course of is more likely to contain centralised organisations resembling exchanges, banks and cash changers,” Li mentioned.
“Legislation enforcement can inform these organisations that exact accounts have been concerned in crime, and ask them to dam their accounts when the investments are available in.”
Chu added that suspicious cryptocurrency accounts may very well be flagged on blockchain techniques, that means all associated “wallets” and exchanges may very well be additionally marked.
“The second you place a discover peg into the pockets, for which there are technical methods to do it, that defence of not figuring out whether or not sure property are tainted will now not be open to you,” he mentioned.
However such choices had been off the desk when it got here to cryptocurrencies being traded with out center events that would halt such transactions, the consultants mentioned, including criminals might additionally launder their proceeds by way of a number of exchanges.
Cheung To, founder and director of blockchain safety agency UDomain, famous that decentralised cryptocurrency exchanges would possibly generally refuse to cooperate with regulation enforcement companies and share data on their platform’s customers.
“It’s fairly doubtless they are going to be uncooperative, in any other case, how can they be decentralised?” he mentioned.
Decentralised cryptocurrencies, resembling bitcoin and Ethereum, don’t contain intermediaries in the case of transactions, that means operators are unable to freeze suspicious accounts or destroy any associated property.
Cheung mentioned convoluted money-laundering chains with out central operators additionally posed hurdles by way of tracing and halting such transactions.
In Hong Kong, regulator the Securities and Futures Fee has solely accredited two cryptocurrency exchanges, OSL and Hashkey, for licences overlaying digital asset buying and selling companies to skilled and retail buyers.
The consultants informed the Put up that Hong Kong wanted extra proactive regulation enforcement and civil litigation to consolidate current guidelines fairly than additional laws if the town aimed to crack down on prison actions that used cryptocurrencies.
Cheung mentioned efficient intervention within the laundering of digital crime proceeds relied closely on swift and devoted motion from regulation enforcement.
“Police might want to contact any exchanges and organisations that had been in touch with the suspicious account in a short time to problem letters or hand them court docket freezing orders,” he mentioned.
He added that such actions needed to be carried out “inside hours” of a case being reported.
“I believe this has loads to do with how proactive regulation enforcers are, in addition to how a lot sources they’ve,” Cheung mentioned.
Chu, in the meantime, argued that moreover Hong Kong authorities accumulating regulation enforcement expertise by way of investigations, native courts additionally wanted to implement laws and construct up the town’s popularity.
“Solely when prosecutors achieve expertise proving such circumstances in court docket and judicial precedents are gathered, are you able to present your jurisdiction has a mature sufficient regime to deal with new, rising points,” he mentioned.
