Bitcoin Secretly Being Used for Money-Laundering?

The Hong Kong Monetary Authority has joined the rising chorus of voices warning about bitcoin and other digital currencies.

HKMA chief executive Norman Chan Tak-lam warned banks and financial institutions trading or handling bitcoin or other digital currencies to be careful about breaching anti-money-laundering requirements.

“Bitcoin or other digital currencies do not require holders to trade under their real name which allows them to be used for money laundering activities,” Chan said on the sidelines of a conference on Monday. “Bitcoin and other digital currencies are considered as commodities, so investors could trade them as commodities. However, investors need to understand these commodities have no monetary backing,” he added.

Hong Kong’s position as one of the world’s largest financial centres means the city is vulnerable to money laundering. In May, the HKMA re-emphasised its determination “to fight serious financial crime and laundering.”

“Cryptocurrencies, ICOs and other investment arrangements involving digital tokens are highly speculative and may pose significant risks. Investors are reminded to exercise due diligence to understand the features and associated risks,” said David Kneebone, general manager of the Investor Education Centre.

ICO is an acronym for Initial Coin Offering, a major means by which the creators of token based digital platforms raise capital from investors.

Chan is not the only senior figure in the financial services industry to warn of the dangers of cryptocurrencies. Earlier this month, Larry Fink, chief executive of BlackRock (BLK) told the South China Morning Post that bitcoin and other cryptocurrencies were mostly being used for illicit transactions, and Jamie Dimon, chief executive of JP Morgan (JPM) said last week that “bitcoin was a fraud.”

The People’s Bank of China (PBOC) has also launched a crackdown on bitcoin and other cryptocurrencies, which has hit market participants and roiled markets.

Last week, coin exchange Bitkan said it would suspend its over-the-counter (OTC) bitcoin and bitcoin cash trading services in response to PBOC’s recent ban on ICOs.


The price of bitcoin, which was close to US$5,000 at the start of September, plunged to US$3,018 on Saturday, before recovering slightly.

“The price action has certainly been led by this Chinese salvo – but healthy profits are moving traders to take gains off the table too until the panic calms,” said Charles Hayter chief executive of Cryptocompare.

The HKMA’s warning follows an earlier statement from Hong Kong’s securities regulator, the Securities and Futures Commission.

Two weeks ago the SFC put companies planning ICOs on notice that any such digital fundraising activity may fall under Hong Kong’s securities code, requiring them to be registered with the regulator.

Separately, Chan also said on Monday that the status of the Hong Kong dollar would not diminish even if more share offerings were made in yuan. His comment was in response to a blog posting from his predecessor Joseph Yam Chi-kwong urging more Hong Kong stock offerings and trading to be made in yuan to reduce currency risks and boost the internationalisation of the Chinese currency.

“Hong Kong had facilities to allow yuan share trading and settlement six or seven years ago but this trading was not active,” Chan said.

Chan said more companies ought to opt for yuan share offering and trading given the many infrastructure projects under the Belt and Road Initiative, and the internationalisation of yuan.

Nonetheless, he said: “I do not think more usage of yuan will affect the status of the Hong Kong dollar. We use Hong Kong dollars to pay our salary, to trade shares, to buy properties and to pay for our meals and shopping.”

“Hong Kong dollar remains the currency of Hong Kong. The HKMA supports the currency and the public has confidence on it. There is no change to the status of the importance of the Hong Kong dollar.”

Read the original article on South China Morning Post. For the latest news from the South China Morning Post download our mobile app. Copyright 2017.

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