Asia's Crackdown on Digital Assets: Heightened Accountability for Senior Leaders

Welcome to Crypto Long & Short, our institutional newsletter. This week, we focus on the evolving landscape of digital asset regulations in Asia and the growing threat of crypto scams targeting seasoned investors. Expert Insights: Asia's Digital Asset Regulatory Landscape By Bob Williams, FinTech, Digital Assets, and Blockchain Advisory Leader (Asia/Pacific), Lockton Companies A wave of new regulations across Asia is pushing trading platforms and asset managers to strengthen their governance and reassess their Directors' and Officers' (D&O) liability insurance. Recent announcements from Hong Kong, Singapore, and South Korea signal a shift towards greater personal accountability for senior management. In Hong Kong, the Securities and Futures Commission (SFC) has clarified senior management's responsibilities regarding client virtual asset custody, emphasizing the need for robust governance, internal controls, and effective oversight. The consideration of whether virtual asset management service providers can rely on non-SFC-regulated or offshore custodians raises concerns about insurance coverage for virtual asset risks. Singapore has introduced licensing requirements for digital token service providers serving overseas customers, focusing on the competency and fitness of key individuals. Senior management must demonstrate a clear understanding of the regulatory framework and exercise effective oversight. South Korea is proposing the Digital Asset Basic Act, which would formalize the digital asset market by regulating issuance, trading, and distributions, introducing new governance structures. These changes would significantly increase compliance obligations for trading platforms and related service providers. Navigating Regulatory Complexity with D&O Insurance The refining of regulatory frameworks in Hong Kong, Singapore, and South Korea reflects a global trend towards heightened regulatory scrutiny and senior management accountability. Firms must proactively review governance structures, custody arrangements, and insurance programs to ensure leadership is protected against emerging liabilities. D&O insurance is now a core element of responsible risk management. Informed Perspectives: Crypto Scams Targeting Experienced Investors By Haidy Grigsby, Special Agent, Cybercrime and Digital Evidence Unit, Tennessee Bureau of Investigation Crypto scams are increasingly targeting experienced investors, retired professionals, and former market participants. These scams often start with a wrong-number text, LinkedIn message, or social media outreach, turning professional conversations into personal or romantic engagements, a tactic known as 'pig butchering.' Scammers exploit familiarity with legitimate infrastructure, instructing victims to open accounts on real exchanges and use self-custody wallets to access external sites. The scams mimic real markets but with a twist: they allow one daily trade at a set time, ostensibly to capture optimal volatility. Victims choose long or short, allocate funds, and confirm brief trades, with scammers claiming to contribute their own funds to build trust. The operation controls the website, and returns are simply numbers entered by the scammer. To build credibility, victims are encouraged to withdraw a small amount after a 'winning' trade, with the withdrawal appearing successful but actually being funded by cryptocurrency stolen from other victims. This encourages larger future deposits. The websites frequently change domains and branding, with victims being told the company is merging, upgrading, or rebranding, when in reality, these changes occur due to law enforcement takedowns. When victims attempt larger withdrawals, they are met with narratives about regulatory holds, tax prepayments, liquidity verification thresholds, or tier upgrades, each paired with urgent demands for more funds. Convincing victims of the truth remains a significant challenge. Law enforcement continues to pursue these cases, and affected individuals should cease communication and report incidents to local law enforcement and relevant platforms. Headlines of the Week By Francisco Rodrigues Institutional adoption in the cryptocurrency space continues to grow, yet old dangers persist, including protocol exploits, state-sponsored attacks, and technology disruption. Chart of the Week Hyperliquid's TradFi bet now constitutes 40% of its own volume. Despite launching as a crypto-adjacent product, HIP-3 is predominantly a TradFi venue, with Commodities driving around 60% of the volume and pure crypto categories accounting for just about 12%. Stay updated with the latest crypto news from coindesk.com and market updates from coindesk.com/institutions.