Hong Kong wants its own Bitcoin ETFs but there’s a problem — a $200m crypto crime wave

Bitcoin ETFs in Hong Kong?

Now that US officials have approved a spot price exchange traded fund for the top cryptocurrency, an influential lawmaker in Hong Kong is calling for the same action in his marketplace.

On Thursday, Johnny Ng, a member of Hong Kong’s Legislative Council, urged the expedited approval of local Bitcoin spot ETFs.

“I believe that Hong Kong must take the lead in the field of virtual assets and the development of the entire industry through innovative policies,” he said in a tweet.

10 firms ready to apply

Ng isn’t grandstanding. In December, the Securities and Futures Commission, or SFC, and the Hong Kong Monetary Authority announced their readiness to accept applications for spot price Bitcoin ETFs.

At least 10 firms are poised to submit their applications, according to comments from Livio Wang, the COO of Hashkey Group, published by Caixin this week.

But a wave of fraud cases have swept through Hong Kong’s crypto scene in the last year, casting doubt on whether making it easier for investors to access digital assets is a good idea.

Law enforcement officials and regulators have been scrambling to clamp down on unlicensed platforms suspected of fleecing investors.

Police have received more than 2,400 complaints related to an exchange called JPEX and estimate losses at around HK$1.6 billion, or $200 million.

Dozens of employees and influencers have been arrested in connection with the case.

Ng, the founder of a fintech investment firm, is a prominent advocate for web3 and blockchain technology in Hong Kong. He says proper investor education can go a long way toward curbing fraud.

Raising consumer awareness has become a top priority because Hong Kong business and government leaders are eager to revive the city as a crypto hub.

Hong Kong is teeming with over-the-counter Bitcoin shops, web3 studios, and trading operations. It’s also a prime locale for industry conferences such as ApeFest.

The SFC has has launched initiatives such as listing suspicious platforms on its website and running ad campaigns on buses advising users to verify a platform’s licensing before engaging with it.

But if crypto crime does anything, it slows down regulatory approval for crypto products.

Here comes BlackRock

In the US, regulators denied approval of Bitcoin ETFs for a decade as officials questioned whether the products would worsen crypto fraud and market manipulation.

It was only the entry of Wall Street giants such as BlackRock and Fidelity Investments, as well as some favourable court rulings for the crypto industry, that eventually turned the tide.

Hong Kong may be in for a similar scenario as it pursues its own home-grown Bitcoin ETFs.

Got an Asia crypto story? Get in touch with DL News’ Asia Correspondent at callan@dlnews.com.