Author: Mankun Blockchain
Many people have a misunderstanding about Hong Kong's Web3 policies: Hong Kong supports the development of virtual assets, so buying coins, selling coins, doing OTC, and carrying out stablecoin business in Hong Kong are all legal and safe.
This statement is only half true.
Hong Kong is indeed developing the virtual asset market and is providing regulatory space for trading platforms, stablecoins, custody, payments, and other businesses. But what Hong Kong encourages is financial innovation that is licensed, has internal controls, customer identification, and suspicious transaction monitoring, not a faster way for unclear funds to exit.
Recently, a case adjudicated by the Hong Kong District Court serves to illustrate this boundary.
According to Hong Kong media reports, on June 23, 2026, the Hong Kong District Court ruled on a money laundering case involving virtual asset OTC. A 34-year-old woman from Mainland China admitted to four counts of money laundering in Hong Kong. She opened multiple local digital bank accounts after arriving in Hong Kong, which were used by a cross-border crime group to receive proceeds of fraud. After the money was deposited, she withdrew the funds in cash and went to local virtual asset exchange shops to buy cryptocurrencies. In two months, the amount involved reached HKD 9.29 million. The court ultimately sentenced her to 47.5 months in prison.
This is not a story about being sentenced for buying U in Hong Kong. What is truly worth noting in this case is how the proceeds of fraud moved from the victim’s account into local digital bank accounts in Hong Kong, and then how cash and OTC were used to convert it into on-chain assets. For the criminal group, OTC is not an investment tool, but a way to move ill-gotten gains from the banking system to the blockchain.
The issue is not buying U, but that fraudulent proceeds are exchanged for USDT
When many people discuss such news, they tend to misinterpret the issue: can’t you buy USDT? Will using OTC get you arrested? If you split the money into several transactions, is that always problematic?
None of these are true.
What truly matters in criminal cases is the source, use, and role of intermediaries in the money. Clean money does not automatically become dirty just because it is split into several transactions; funds that have real investments, trade, family support, or immigration arrangements will not constitute a crime just because they use a certain financial tool.
However, if the upstream source is fraudulent proceeds, every subsequent action will be reinterpreted. Opening an account is not just an ordinary account opening but providing a revenue channel; withdrawing cash is not merely a withdrawal but severing the banking flow; buying U OTC is not just a trade but converting criminal gains into on-chain assets that are easier to transfer across borders; transferring coins to a specified wallet is no longer just a transfer but assisting the criminal group in controlling and moving the proceeds.
This is why, in such cases, those who are held accountable often include not only the people at the front of the fraud scheme. Who opened the accounts, who withdrew the money, who exchanged cash for U, who provided the wallet address, and who took the fees—these actions will all be considered within the same chain of funds.
For criminal defense, the key is not “understanding coins,” but whether the money trail can be explained: where the money came from, why it came to you, why it needed to be withdrawn, where it went after the exchange, and whether the involved parties saw any abnormal signals at that time.
Accounts are responsible for receiving money, OTC is responsible for outflow: how the police will reconstruct the money trail
When cross-border criminal groups want to launder money, the first step is usually not to buy coins immediately but to find accounts first.
The victim's money needs to be deposited into a local account that appears genuine, can receive payments, and can be withdrawn. The more accounts there are, the easier it is to disperse funds; the more dispersed the account holders are, the easier it is for the criminal group to hide behind them.
Therefore, renting, selling, or lending accounts, or opening accounts to receive money as per others' instructions, has never been risk-free. The account holder may feel that they are not deceiving anyone, just helping to transfer funds. But to the authorities, the account is the entry point for ill-gotten gains into the Hong Kong financial system.
If there are then large amounts deposited in a short period, immediate withdrawals, mismatched payers and trading counterparts, requests in chats to not leave notes or ask about sources, and urgency to handle quickly, these will all become evidence for judging “knowing or ought to know.”
The sensitive point in the OTC phase lies in the break between cash and on-chain assets.
On one side is cash, with sources difficult to trace; on the other side is USDT, which transfers quickly, across platforms, wallets, and jurisdictions. If there is no strict KYC, source of funds checks, transaction records, retention of wallet addresses, and handling of suspicious transactions, OTC will shift from a transaction service to a financial channel.
The most dangerous thing in the industry is not “clients coming to buy U,” but that the client’s trading behavior cannot be clearly explained. For example, a person without a stable source of income comes in with millions in cash to exchange for stablecoins; the same intermediary continually brings different clients to the store, but the wallet addresses, devices, and contact methods are highly overlapping; funds flow quickly between multiple bank accounts, ultimately concentrating in OTC to buy coins; the client refuses to explain the source of funds, only demanding immediate receipt of coins and transfer.
If these transactions are accepted without due diligence, when the case is examined later, it will be difficult for the OTC store to justify the past with just “I didn't know.” In criminal cases, “I didn't know” is not merely a verbal defense; it requires examining whether you have done risk-matching identification, verification, and refusal.
Hong Kong supports Web3, does not mean loosening OTC anti-money laundering
Hong Kong is indeed promoting the development of the virtual asset market. The licensing system for virtual asset trading platforms is already in operation, and the regulatory framework for stablecoin issuers was implemented on August 1, 2025. According to public information from the Hong Kong Monetary Authority, stablecoin issuers in Hong Kong have entered a licensed regulatory framework, and market participants must comply with the Stablecoin Ordinance and related guidelines; unlicensed activities and improper advertising may trigger regulatory consequences.
However, this regulatory path is not a relaxation, but rather placing virtual assets within a clearer financial regulatory framework.
In February 2024, the Hong Kong government conducted public consultations on legislative proposals to regulate virtual asset OTC, proposing a licensing system for virtual asset OTC service providers under the Anti-Money Laundering and Terrorist Financing Ordinance. There are several key pieces of information in the proposal: providing virtual asset and money spot trading services as a business requires a license from the Customs and Excise Department; the regulatory scope covers physical stores and online platforms; and the Customs and Excise Department will oversee the anti-money laundering and counter-terrorist financing compliance of licensed entities.
This indicates that regulatory agencies are starting to view OTC as a critical interface in the virtual asset market. It connects fiat currency and virtual assets, as well as banks, cash, stablecoins, wallets, and cross-border transfers. The more important the interface, the less likely it is to remain in a state of “introducing clients, cash transactions, and completing transactions without sourcing” for long.
The Hong Kong Customs announced a money laundering case in July 2025 involving approximately HKD 1.15 billion, related to cash smuggling and virtual assets. Customs noted that the parties involved were frequently and rapidly conducting large transactions of stablecoins and fiat currencies with indistinct sources of funds, which was severely disproportionate to their backgrounds and financial status. This statement actually holds considerable significance within the industry: law enforcement agencies assess OTC risks not merely by whether coins were bought, but by whether the amounts, frequency, customer profiles, sources of funds, and transaction methods can explain each other.
When looking at all this information collectively, Hong Kong's stance is not contradictory: the compliant virtual asset industry continues to develop, while the channels used to launder proceeds through accounts, cash, OTC, and wallets are increasingly tightened.
Ordinary people and OTC stores, what explanations should each keep
In such cases, ordinary people may get caught up.
Some are persuaded by friends to open a few accounts in Hong Kong, “just to help receive some money.” Some sell their bank accounts or electronic wallet accounts to intermediaries. Some think of themselves as merely runners, taking a small fee to withdraw cash, buy U, and transfer coins, believing it’s at most a violation, without reaching the level of a criminal case.
The issue is that the significance of account real-name systems is that someone is responsible behind the account. The criminal group is willing to offer you a fee not because the act is risk-free, but because it needs your identity to bear the risk.
When the victim files a report, banking flows are traced, accounts are frozen, and the police come knocking, the one who needs to explain the source of funds is the account holder themselves. At that point, chat logs, receipt flows, withdrawal records, OTC transactions, and wallet addresses will all be looked at in conjunction. Whether you can produce real goods, services, loans, investments, or other underlying relationships will directly determine how persuasive “helping a friend” is.
If an ordinary person truly has a need for cross-border funds, they should revert to the real reasons and compliant pathways. Immigration, investment, family support, medical needs, trade settlement, and overseas living each have different documents, limits, tax, and foreign exchange management requirements. If compliance pathways seem cumbersome, and they turn to borrowing accounts, seeking underground money exchanges, or cash to buy U, it often does not lower costs but piles civil, administrative, and criminal risks together.
For practitioners related to OTC, wallets, payments, and stablecoins, risk control cannot stop at “clients say they are legal.” Compliance is not just about snapping a photo of an ID or having the clients sign a sentence saying “the source of funds is legal.” Truly useful records should link customer identity, payment pathways, source of funds documents, transaction purposes, wallet addresses, transaction hashes, and risk control judgments. When encountering evidently unreasonable transactions, there should also be evidence for refusal, suspension, enhanced due diligence, or reporting of suspicious transactions.
Mainland clients buying U through Hong Kong should also pay attention to another layer of legal risks between the two places. This is also a common area where many easily misjudge: operating in Hong Kong does not mean that risks are calculated only under Hong Kong law. If the source of funds, client solicitation, account provision, currency exchange needs, or upstream crime is in the Mainland, actions occurring in Hong Kong do not mean that risks only remain in Hong Kong. In the Mainland context, common entry points for virtual currency and cross-border funding cases include illegal operations, concealing or disguising the proceeds of crime, money laundering, aiding internet crimes, conspiracy to defraud, operating illegal gambling, and illegally accepting public deposits. The key still lies not in the label of “buying and selling USDT,” but in where the funds came from, why they passed through you, what you earned, whether there was collection or payment on behalf of someone else, whether there were abnormal prices, and whether there is evidence to explain the purpose of the transaction.
If accounts have already been frozen, the police contacted, or requests to assist investigations have been made, the first step is not to repeatedly explain “I am just helping,” but to gather the materials: source of funds documents, foundational transaction relationships, chat logs, receipt flows, withdrawal records, OTC transaction vouchers, wallet addresses, on-chain hashes, counterparty information, and the process through which you believed this transaction to be legal. In criminal cases, being able to clearly explain the money chain is often more important than simply stating “I don’t understand coins.”
What can be explained is the transaction; what cannot be explained may be the money chain
What truly deserves to be remembered about this Hong Kong OTC money laundering case is not “buying U could land you in prison,” but rather: when a sum of money must be transferred through someone else's account, cash withdrawal, OTC to buy coins, and foreign wallets, it is no longer just a technical path issue, but a money chain that needs to be explained by law.
Hong Kong is developing Web3, and that direction has not changed. Virtual asset trading platforms, stablecoins, tokenized assets, crypto payments, wallets, and custody could all potentially become part of Hong Kong's financial market.
But developing Web3 does not mean allowing virtual assets to become a fast track for criminal funds. The more new financial tools are incorporated into regulation, the more they must accept constraints on accounts, clients, sources of funds, transaction records, and monitoring of suspicious transactions.
For ordinary people, do not borrow accounts, do not sell accounts, do not collect money, withdraw, buy U, or transfer coins on behalf of strangers. For practitioners related to OTC, wallets, payments, and stablecoins, do not just ask clients how much U they want to buy; also ask where the money comes from, why it is bought this way, where it goes after the transaction, and whether there is evidence to explain it.
What can be explained is the transaction; what cannot be explained may be a gray or black financial chain.
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