The consultants mentioned the town had accrued 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 belongings.
Joshua Chu Kiu-wah, a lawyer specialising in know-how disputes and cybersecurity, mentioned the main target needs to be much less on new legal guidelines and laws for the reason that digital belongings have been already lined, and the important thing was “more about knowing how to apply existing rules”.
Veteran cryptocurrency investor Louis Li Sze-chung, who can be an adviser to native tech start-up affiliation 852Web3, in the meantime, mentioned the demand for a ransom in cryptocurrency in the course of the thwarted kidnapping earlier this month.
After the boy was snatched from the Tseung Kwan O Plaza purchasing centre, his elder sister acquired a ransom word demanding 660,000 Tether cash value greater than HK$5.1 million.
Li mentioned the stablecoin, additionally known as USDT, might simply be intercepted.
“USDT is issued by a company, which converts US dollars into cryptocurrency. It’s a bit like how Octopus works actually. You put down cash for digital currency,” he mentioned.
“When crimes happen, it’s possible to ask the company to help freeze or even destroy money held in certain accounts.”
Stablecoins are a sort of digital foreign money that pegs their worth to a different foreign money in fiat cash or a commodity, which is all operated by an organization.
Final November, Tether’s platform voluntarily froze US$225 million value of USDT cash after the US 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 could possibly be performed inside at some point, whereas conventional financial institution accounts might take months because the transfer required a choose’s approval, until the case certified for an pressing court docket order.
Chu and Li mentioned suspicious account homeowners could possibly be recognized once they opted to transform their digital belongings into money.
“This process is likely to involve centralised organisations such as exchanges, banks and money changers,” Li mentioned.
“Law enforcement can tell these organisations that particular accounts have been involved in crime, and ask them to block their accounts when the investments come in.”
Chu added that suspicious cryptocurrency accounts could possibly be flagged on blockchain techniques, which means all associated “wallets” and exchanges could possibly be additionally marked.
“The moment you put a notice peg into the wallet, for which there are technical ways to do it, that defence of not knowing whether certain assets are tainted will no longer be open to you,” he mentioned.
However such choices have been off the desk when it got here to cryptocurrencies being traded with out center events that might halt such transactions, the consultants mentioned, including criminals might additionally launder their proceeds by a number of exchanges.
Cheung To, founder and director of blockchain safety agency UDomain, famous that decentralised cryptocurrency exchanges may typically refuse to cooperate with regulation enforcement businesses and share info on their platform’s customers.
“It’s quite likely they will be uncooperative, otherwise, how can they be decentralised?” he mentioned.
Decentralised cryptocurrencies, akin to bitcoin and Ethereum, don’t contain intermediaries in the case of transactions, which means operators are unable to freeze suspicious accounts or destroy any associated belongings.
Cheung mentioned convoluted money-laundering chains with out central operators additionally posed hurdles when it comes to 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 masking digital asset buying and selling providers to skilled and retail buyers.
The consultants informed the Submit that Hong Kong wanted extra proactive regulation enforcement and civil litigation to consolidate present guidelines relatively 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 will need to contact any exchanges and organisations that had been in contact with the suspicious account very quickly to issue letters or hand them court freezing orders,” he mentioned.
He added that such actions needed to be performed “within hours” of a case being reported.
“I think this has a lot to do with how proactive law enforcers are, as well as how much resources they have,” Cheung mentioned.
Chu, in the meantime, argued that in addition to Hong Kong authorities accumulating regulation enforcement expertise by investigations, native courts additionally wanted to implement laws and construct up the town’s status.
“Only when prosecutors gain experience proving such cases in court and judicial precedents are accumulated, can you show your jurisdiction has a mature enough regime to tackle new, emerging issues,” he mentioned.