A nascent spring thaw and the illusion of fake romance follow the long crypto winter. Governments and regulators struggle to keep up.

The current price of Bitcoin likely signals the end of a long and hard, even bitter, crypto winter. As it nears levels not seen since 2021, the talk is again about the intricacies of mining and an impending quadrennial halving, possibly as soon as this April. 

Gone, at least, for now, is all that talk about FTX’s collapse, Binance’s exorbitant plea deal with US authorities, or even how much time Sam Bankman-Fried will actually spend in prison when he is sentenced at the end of this month.

Lowly Fiat Currencies

A market update on Tuesday by Independent Reserve, which by its own account is the region’s most trusted cryptocurrency exchange, crowed about how BTC had reached all-time highs against 14 of the world’s top 20 so-called fiat currencies - or what most of us would consider normal money.

Another by Saxo on Wednesday cited the investor rush following the introduction of Bitcoin ETFs in January, something finews.asia has discussed at some length. Still, the bank’s head of FX Strategy Charu Chanana appeared almost wistful in calling for «prudent risk management» given stretched positions and high volatility.

Prepared or Not

The question now is whether governments and regulators are ready for this new rally and everything that comes with it, particularly given the efforts underway in Hong Kong and Singapore to turn their jurisdictions into virtual and digital assets hubs, something finews.asia has also commented on at some length in several articles and comments.

The signs are mixed at best. If the misdeeds of the past crypto winter lay mainly in the improper segregation of client assets from that of the exchange or wallet provider, the current round of scams seems far more intimate, and romantic, in nature.

Licking its Wounds

That is because the level of love-related scams, somewhat off-puttingly termed pig-butchering by the industry, doubled last year, data from blockchain data platform Chainanalysis indicates. 

Indeed, the platform maintains that such scam activity is up by an eye-watering factor of 85 since 2020 even though the total value of all crypto-crime fell almost 40 percent to $24.2 billion in 2023, when the industry took a timeout to lick its wounds.

High Multiples

It gets better, or worse, depending on how you look at it. According to Chainalysis, the average payment size of romance scams is the largest of all the categories it reports, at $4,953, far higher than the second-highest, NFT scams, which came in at $3,095.

This is also the kind of scam that can affect everyone from a retail client to the high - even ultra-high - net worth, particularly if they are undergoing a vulnerable period in their lives.

«Keep in mind too that many victims likely make multiple payments to an individual scam address, so the actual losses per victim can be much higher than these averages,» Chainalysis indicated.

JPEX and More

Hong Kong has been particularly hard hit on that front this year and last. The first reality check came with JPEX last year, something that finews.asia commented somewhat wryly at the time, at least when it came to arrests of locally famous television actors.

Still, the government and authorities seem to be at a loss at how to react to this latest wave of scams enveloping the city. An announcement in late February by the Hong Kong Association of Banks seemed to indicate a gun had been held to the head of the city’s retail banks by authorities although things have since gone strangely silent on that front since then.

Slogans with Coffee

More importantly, as part of that overarching effort, it seems city policy had even suggested putting slogans onto coffee cups and napkins following a surge of cases that managed to dupe CEOs of international companies, prompting one woman to send almost $400,000 to scammers, as the «South China Morning Post» then reported.

There is a larger truth to all this. Cups and napkins are never going to be enough when it comes to stopping or even raising awareness about these things. The greater crypto-sphere needs to mature to the point that it is no longer inalienably connected with financial crime. As with the segregation of assets, some progress is likely being made, but we are still very far away from generally responsible investment management vis-a-vis clients.