The Cyber Security and Technology Crime Bureau (CSTCB) of the Hong Kong Police Force has launched CyberDefender, a platform to educate the general public about the potential risks of Web3 and the metaverse.
During its launch, the platform hosted an event titled “Exploring the Metaverse,” which took place across three virtual venues, discussing strategies for preventing crime within the metaverse.
CSTCB chief inspector Ip Cheuk-yu stressed the importance of caution in the metaverse, urging users to remain vigilant. He maintained that cyber crimes on the regular internet could also occur within the metaverse. These include investment fraud, unauthorized system access, theft and sexual offenses.
The chief inspector added that the decentralization aspect could increase the potential risk of asset theft.
“The decentralized nature of virtual assets in Web3 may also increase the likelihood of cyber criminals targeting endpoint devices, virtual asset wallets and smart contracts,” Cheuk-yu said.
Increase of virtual asset-related crimes
Crypto scams in Hong Kong saw a significant increase last year, with losses amounting to 1.7 billion Hong Kong dollars ($216.6 million), marking a surge of 106 percent compared to the previous year. The number of cases rose by 67 percent to 2,33, as reported by the local police and the South China Morning Post (SCMP).
According to official data from the Hong Kong Police CyberDefender website, crypto-related scams accounted for over 50 percent of the HK$3.2 billion ($407 million) stolen from city residents in tech crimes.
In crypto-related scams, criminals take advantage of the anonymity, intricate transaction processes and difficulty in tracing the final destination of the funds, making them more difficult to track.
CSTCB said that typical crypto scammers often pose as experienced investors in crypto assets, precious metals or foreign exchange products. They employ deceptive tactics to entice victims, encouraging them to install fraudulent investment applications that display fabricated transactions and returns.
In April, the SCMP reported that a 55-year-old Hong Kong resident had fallen victim to an online crypto investment scam and suffered a significant loss of nearly HK$7 million ($891,723).
The victim became aware of the scam when she attempted to borrow money from her daughter to fulfill the requirement of providing “surety” to retrieve a portion of her investment.
She was initially attracted to the promise of daily interest amounting to HK$2,500 and a guaranteed profit of tens of thousands of U.S. dollars. The victim was convinced to open an account on a deceitful website, which presented manipulated data on coin prices.
Hong Kong’s ongoing regulatory efforts
In February, the Securities and Futures Commission of Hong Kong (SFC) collected public input on a recently proposed licensing framework for cryptocurrency exchanges, scheduled to be implemented in June 2023.
The proposed regulatory guidelines draw upon the existing requirements for licensed securities brokers and automated trading venues. However, some changes have been introduced to enhance and adapt these prerequisites to the context of cryptocurrency regulations.
SFC CEO Julia Leung emphasized the need for clear regulatory guidelines in the cryptocurrency ecosystem, citing the recent turbulence and the collapse of industry players such as FTX. Leung maintained that investor protection remains a top priority in formulating these guidelines.
She explained that their proposed requirements for virtual asset trading platforms adhere to the principle of “same business, same risks, same rules,” which they have followed since 2018.
Based on the announcement, people or entities offering cryptocurrency-related services must seek a license from the SFC. Specific criteria and conditions are outlined for cryptocurrency exchanges and service providers to comply with.