Hong Kong to regulate 'grey-market' crypto ATMs after HK$2.68 billion fraud surge

Unregulated cryptocurrency ATMs have proliferated across Hong Kong, creating a legal grey area that authorities warn is being exploited for financial crime. These kiosks, often tucked away in unstaffed 24-hour venues such as laundromats and claw-machine arcades, operate without a dedicated licensing regime, leaving consumers vulnerable to irreversible losses.

According to data from Coin ATM Radar, there are approximately 236 crypto ATMs in the city, with heavy concentrations in Mong Kok, Tsim Sha Tsui, Wan Chai, and Quarry Bay. The Securities and Futures Commission (SFC) identified roughly 200 virtual asset retailers in Hong Kong as of 2024, a figure that includes these automated kiosks. The lack of oversight comes at a steep cost; Hong Kong police recorded 969 cryptocurrency-related cases in the first half of this year alone, with total losses reaching HK$2.68 billion.

The Regulatory Gap

The rise of these machines coincides with a surge in retail interest in digital assets and a lack of formal rules for over-the-counter trading. This regulatory vacuum stands in stark contrast to neighboring Singapore, which has banned cryptocurrency ATMs entirely. Meanwhile, Australia permits their operation, though the Australian government issued warnings in 2025 that such machines serve as high-risk channels for money laundering.

Local concerns are further heightened by previous failures in the sector, most notably the JPEX scandal. That case involved an alleged fraud of HK$1.6 billion affecting more than 2,700 victims, serving as a precedent for the risks inherent in unregulated virtual asset operators.

Industry and Security Risks

Because blockchain transactions are irreversible and these ATMs often lack robust identity verification, recovering stolen funds is nearly impossible, according to Legislator Johnny Ng Kit-chong. The unstaffed nature of the locations makes them ideal for illicit financial activities and scams, where users may interact with fraudulent machines or be directed to them by external actors.

However, some industry leaders argue that regulation would actually benefit legitimate businesses. Tristan Fong, CEO of Localcoin, stated that clear rules would protect consumers and raise industry standards, allowing operators to implement more sophisticated controls.

Next Steps for Legislation

To close these loopholes, the Financial Services and the Treasury Bureau is currently finalizing a bill to regulate virtual asset dealers, custodians, and advisory services. The government targets introducing this legislation to the Legislative Council later this year. Once implemented, the bill is expected to bring ATM operators under a formal licensing framework, providing the consumer protections and oversight currently missing from the city's grey market.