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Life comes at you fast. Memecoin cycles… even faster.

Such was the gwei on a bloody Thursday in the memecoin trenches. The trend of the day was Changpeng Zhao’s dog. The former Binance CEO said on X that he would tweet its name and photo, knowing full well that the simple act would fuel opportunistic people to create memecoins.

Many crypto personalities have unwittingly seen their pooches turned into tokens. Seldom do they engage with – let alone encourage – the trend. CZ was different. He promised to release the alpha, but openly questioned how traders would know which memecoin was the “official” token to buy.

Nevermind that. At 11:12 AM New York time, CZ revealed he had a Belgian Malinois named “Broccoli.” In the same post he vowed not to release his own Broccoli coin, but teased he might trade the successful ones, and the BNB Foundation might lend some promotion, too.

There would be no bountiful Broccoli on Thursday.

By 11:15, oodles of tokens carrying the ticker BROCCOLI were trading on BNB Chain and Solana. Some of them soared out of the gate, seemingly reaching billion dollar-plus market caps as traders jockeyed for the predominant coin. With no apparent victor consolidating the bids, they came crashing down just as quickly.

The sudden spike and immediate reversal underscored the dangers of playing in the unregulated, lawless and morality-free memecoin economy. No one profits more than insiders.

Take the wallet that starts with 0x392eb. It spent less than $1000 to create the token “CZ’s Dog (Broccoli)” immediately after CZ’s tweet; it awarded itself over 110 million of the asset at mint, becoming its single-largest holder. Two minutes later it started selling.

Barely 20 minutes after launching Broccoli, 0x392eb had unloaded its entire stack for $6.5 million in profits. Its sell pressure helped crush the buyers rushing into the token on the belief (or rather desperate hope) that it would soar up only.

The token saw over 30,000 buyers and sellers Thursday execute nearly 100,000 transactions. Some early actors made millions, according to DEXscreener, but the winners’ tail quickly diminished. The 100th most successful Broccoli trader made a comparatively paltry $20,000 profit.

Anyone who bought this Broccoli in its first hour – the height of the craze – and held, is down big time. The token had a market cap of around $50 million at press time, well below its highs.

While 0x392eb was unloading their Broccoli as fast as they could, CZ spoke up:

“Let the best meme coin in the community win,” he posted on X, reiterating once again he would not personally pick a winner. He seemingly acknowledged in his post that this flavor of memecoin trading was a major gamble.

What he didn’t acknowledge in his post was the deck being so heavily stacked against traders. When one trader makes millions on a coin simply by creating it, giving it to themselves and selling, their profits only come because other people are willing to buy. That the creator is selling troves makes the coin’s success all the more unlikely.

What happened with 0x392eb’s Broccoli played out in similar fashion with other tokens that tried to capture the attention CZ spawned, further underscoring how the disjointed effort failed to pick a winner.

The escapade spawned dozens of posts on X lampooning people who lost money on Broccoli. It also sparked some soul-searching about the depressed state of memecoin trading.

Coinbase (COIN) topped already strong estimates for fourth quarter results, posting a 138% year-over-year gain in revenue amid the major bull move in crypto surrounding the November election of Donald Trump.

The leading U.S. crypto exchange posted fourth quarter revenue of $$2.27 billion against consensus $1.84 billion and $1.26 billion three months prior.

Adjusted earnings for the three months of of $1.3 billion topped consensus of $906.9 million.

Trading volume in the fourth quarter was $439 billion, up 185% from the year-ago level. Transaction revenue of $1.56 billion was higher by 194% year-over-year.

“Crypto’s voice was heard loud and clear in the U.S. elections, and the era of regulation via enforcement that crippled our industry in the U.S. is on its way out,” said CEO Brian Armstrong in his shareholder letter. “Our goals in 2025 are to drive revenue, drive utility, and scale our foundations.”

Shares of Coinbase are up just modestly in after-hours trading, but the stock already rallied 8.5% during the regular session today following blowout fourth quarter crypto results from Robinhood on Wednesday.

Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk’s full AI Policy.

The co-founders of Hashflare, a crypto mining ponzi scheme that stole $577 million from hundreds of thousands of investors around the world, both pleaded guilty on Wednesday to conspiracy to commit wire fraud.

Sergei Potapenko and Ivan Turõgin, both 40, were arrested in their native Estonia in November 2022 and extradited to the U.S. on an 18-count indictment. Yesterday, both men pleaded guilty to one count each of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.

Between 2015 and 2019, Potapenko and Turõgin convinced Hashflare’s investors to rent a percentage of the scheme’s crypto mining operations in exchange for a percentage of the cryptocurrency Hashflare produced. But, according to court documents, Hashflare had only a tiny fraction of the mining equipment it purported to have – less than 1% of the computing power Potapeno and Turõgin had sold. When investors tried to claim their proceeds, prosecutors say the two men either resisted making payments by making excuses or paid them back with crypto purchased on the open market.

Read more: Two Estonians Charged With Running a Series of Crypto Scams Totaling $575M

Potapenko and Turõgin’s lawyers say that none of Hashflare’s investors suffered financial harm, telling CoinDesk that the men’s only crime was lying about the size of Hashflare’s mining operation.

“Ivan and Sergei ran successful businesses, providing real services, employing almost 100 Estonians, and doing charitable work in Estonia. As Ivan admitted [Wednesday], one of his and Sergei’s businesses promised to mine crypto and did in fact mine crypto, but not as much as it had promised; instead, it sometimes repaid customers with crypto it had purchased on the open market,” said Andrey Spektor, partner at Norton Rose Fulbright US LLP and counsel to Turogin.

“Importantly, however, as we will show at sentencing, no customer has suffered any harm. Ivan and Sergei look forward to returning to Estonia and resuming their lives.”

According to court documents, the men used their victim’s money to make dozens of real estate investments and purchase luxury cars. As part of the plea agreement, Potapenko and Turõgin agreed to forfeit assets valued over $400 million, which will be used to pay back investors.

Potapenko and Turõgin will be sentenced in a Seattle court on May 8.

Last November, the American people clearly spoke. They support President Trump and the agenda he campaigned on: A “Golden Age” in America. A key component of President Trump’s agenda is leveraging the U.S.’s leadership in advanced technology and economic strength for the benefit of all Americans.

Nowhere is this renewed focus on using our strengths for the future more necessary than in the development of digital assets and blockchain operations, where Washington has been asleep at the wheel for far too long.

According to surveys, 55% of American investors own Bitcoin, and more than 40 million own some type of cryptocurrency. Even our largest financial institutions are now embracing digital assets and the transformative power of blockchain technology. There is little doubt that these innovations will make financial products more affordable and accessible. From stablecoins to tokenization of assets, to decentralized finance applications, these advancements have the potential to lower costs and expand opportunities for both investors and consumers.

Despite its transformative potential and widespread adoption, the Biden-Harris Administration refused to recognize the promise of this technology. Officials weren’t just indifferent – they were openly hostile. No matter how safe or innovative, products associated with “crypto” or “digital assets” were stonewalled and litigated into purgatory. Regulators refused to provide meaningful guidance on how this technology could be implemented in a compliant manner. Worse, they implemented new policies to make adoption even more difficult.

Today is a new day. There is broad agreement that we need fit-for-purpose regulation that unlocks opportunities while providing the consumer and national security protections Americans deserve. The world counts on us to ensure that global payment systems are not used for nefarious purposes, including financing terrorism and drug trafficking. Because of the Biden-Harris Administration’s abdication of responsibility over the past four years, the United States has fallen behind and others, including our adversaries, are developing products and systems that threaten the primacy of the dollar.

Despite the Biden-Harris Administration’s reluctance, during the last Congress House Republicans led the charge and passed landmark legislation creating a forward-looking regulatory framework for digital assets. This bipartisan bill provides appropriate protections for consumers and proactively addresses national security and money laundering issues while securing the United States as a leader in digital assets and blockchain innovation.

Congressional Republicans will now pick up where we left off and work in a bicameral manner with the Trump Administration and financial regulators to ensure that the open hostility from the Executive Branch of the past four years is eliminated.

Congress has a unique opportunity to enact legislation that plays to American strengths. We will provide a foundation that will unleash innovation in the digital assets and blockchain space, while at the same time solidifying the status of the U.S. dollar as the reserve currency and the preferred method of payment for lawful transactions around the globe.

As leaders of digital assets on the House Financial Services Committee, our immediate priorities include establishing a federal framework with clear rules around stablecoins, providing clarity for the initial sale and distribution of tokens, creating pathways for the registration of centralized platforms for the trading of tokens, implementing strong protections against money laundering and terrorist financing, and ensuring fair competition.

We have already begun this work by recently releasing our discussion draft to establish a framework for the issuance and operation of dollar-denominated payment stablecoins in the United States.

There are those who share the Biden-Harris administration’s view that the digital assets ecosystem is, in the words of former SEC Chair Gary Gensler, “full of hucksters, fraudsters, and scam artists.” But that sentiment only underscores the urgent need for these efforts. Effective legislation and proactive regulatory engagement will ensure good actors with innovative products can thrive in the U.S. and consumers are appropriately protected from rug pulls, market manipulation, and other fraudulent activity.

We are the world leaders in finance and technology because, over our history, we have looked forward and embraced innovation as a means of lowering costs, increasing opportunity, and enhancing protections. We need to be true to our history and do it again.

With our newly formed Bicameral Working Group for Digital Assets, we will work in lockstep with Senate Banking Committee Chairman Tim Scott, Senate Agriculture Chairman John Boozman, House Agriculture Chairman G.T. Thompson, and White House Crypto Czar David Sacks to advance legislation that delivers on the promises we made to the American people. The “Golden Age” of digital assets in the United States begins now.

Nasdaq-listed Zoom Communications (ZM), a stock market high-flyer during the pandemic boom that’s faced tougher times since, should embrace a bitcoin (BTC) strategy to shake up sluggish stock performace and provide value to shareholders, said Eric Semler, chairman of medical technology firm Semler Scientific (SMLR).

“Once a pandemic darling, Zoom is now stuck in a highly competitive, slow-growth market,” Semler said in an X post Thursday. “By leveraging its $7.7 billion cash pile, $2 billion in annualized free cash flow, and ready access to low-cost debt, Zoom could rapidly become one of the largest corporate holders of Bitcoin,”

Zoom shares are down about 85% from their 2020 peak even as the Nasdaq and S&P 500 have continued to push to new record highs.

Semler’s comments came from experience as his company adopted a BTC treasury strategy last year after studying the example of Michael Saylor’s Strategy (MSTR), formerly known as MicroStrategy, on how to provide value for the company’s shareholders. Semler since has converted most of its cash holdings to bitcoin and tapped capital markets for more cash with which to acquire tokens. As of the most recent update, it’s accumulated 3,192 BTC, worth $305 million at current prices.

Even as SMLR shares have struggled in recent weeks alongside bitcoin’s poor price performance, the stock price has still more than doubled since the company disclosed its first bitcoin purchases in mid-2024.

Zoom Communications, said Semler, is “Zombie Zone” company number one, and he promises more such picks in the future.

Read more: Semler Scientific Studied MicroStrategy’s Success Before Adopting Bitcoin Strategy

MetaDAO’s push to revolutionize governance via markets-based decision-making is getting a boost from the creator of its creed: Robin Hanson.

The crypto group on Thursday hired Hanson – a George Mason University economics professor who created the notion of futarchy a quarter century ago – as a paid advisor. His addition gives an intellectual and likely optical edge to the year-old project that commands a throng of Solana crypto-governance wonks.

Futarchy rests on the premise that markets are better at determining optimal outcomes than politicians or even their voters – the popular power centers of modern politics. Futarchaic systems of governance look more like a prediction market than a ballot box.

How it works, at least in metaDAO’s version, is perhaps best understood by examining the way metaDAO addressed the question, “Should MetaDAO hire Robin Hanson as an advisor?” To do so, the project spun up markets where traders could speculate on the price of META tokens if Hanson were to be hired, and if he weren’t.

Read more: ‘The Goal Is Number Go Up’: Inside a DAO’s Radical Governance Experiment

Hanson is being hired because MetaDAO traders pushed the price of META higher in the scenario where he was brought on board. Essentially, that his participation would be more beneficial to the project than his absence, and well worth the 20.9 META ($24,000) he’ll be paid over two years.

Hanson’s not in it for the money but rather the “glory.” He devised futarchy because he believes governance is fundamentally broken. In his mind, and MetaDAO’s, markets where people have a financial incentive to make good decisions reach better outcomes than political systems do

“If we could actually have a better governance mechanism, we could change the world,” he said.

The pseudonymous co-founder of MetaDAO, who goes by Proph3t, has been talking with Hanson about their creation’s design for at least a year. Proph3t brought the effort to formally hire Hanson before MetaDAO earlier this week.

His work will “primarily be mechanism design and strategy advice,” according to the proposal page. It may also see Hanson co-author blog posts with MetaDAO about “new futarchic mechanisms.”

MetaDAO debuted at last year’s Solana hacker house mtnDAO in Salt Lake City. It was a hit among the crypto builders there who froze work on their own projects to trade its decision markets en masse. MetaDAO’s governance markets have since been adopted by a growing number of projects in the Solana ecosystem, including Jito.

MetaDAO isn’t the only futarchy-focused project that Hanson is engaging with, but he said its the farthest-along public effort. Crypto adherents are especially open to futarchy because it aligns with the innovation-tinged stories that he said they tell themselves when grasping for the meaning behind their wealth.

“When people make money in the world they need to tell themselves a story about why they made the money,” Hanson said, “crypto people tell themselves it’s their insight to potential innovation and changing the world.”

Crypto isn’t all that different from politics. According to Rushi Manche, the founder of blockchain company Movement, “Crypto is an attention game.”

It’s fitting, then, that Donald Trump — the master of all things attention — is so at home selling memecoins. But it’s not just Trump’s inner circle that’s managed to capitalize on his crypto ventures, which include the $TRUMP coin and World Liberty Financial.

Once a vocal crypto skeptic, the president has become the industry’s largest “key opinion leader” — or KOL, in blockchain industry parlance: a trader whose portfolio is closely watched by other investors deciding what to buy and sell.

Trump’s foray into crypto has created a new go-to-market playbook for ambitious token peddlers like Manche — blockchain founders who realize pumping the price of a token can be as simple as elbowing into a sitting president’s crypto portfolio.

The president’s primary vehicle for blockchain trades is World Liberty Financial (WLFI), a decentralized finance (DeFi) venture he announced with his sons over the summer. After accruing more than $400 million by selling a token, the company, which does not yet have a product, has built up a portfolio containing millions of dollars in the assets of other crypto projects. On Wednesday, it announced it was launching an official “strategic reserve” of crypto investments.

The trades have already raised serious concerns about conflicts of interest, insider dealing, and the very nature of how influence is leveraged in the digital asset space. Trump’s political opponents are calling for investigations into his growing blockchain empire.

But crypto founders like Manche see World Liberty’s crypto investments as something different: a once-in-a-generation marketing opportunity. “You need to have a product roadmap that makes sense,” said Manche. “But you also need to have a strategy for your token.” And what better way to boost the price of your cryptocurrency than by publicly tying it to the leader of the free world?

Moving MOVE

Twenty-two-year-old Rushi Manche is set to launch Movement L2, an Ethereum-based blockchain. Despite his youth, he’s earned a reputation within the industry as a sharp operator, having secured over $38 million in venture funding immediately after college.

Ahead of Donald Trump’s second term, Manche worked to forge ties with his circle. On the eve of the inauguration, he attended the Crypto Ball, an event connecting crypto industry leaders with political insiders. There, he engaged with key figures like Zak Folkman and Chase Herro, leaders of Trump’s World Liberty Financial.

On Jan. 28, when news broke that World Liberty Financial had acquired approximately $2 million in the Movement’s MOVE tokens, Manche pounced.

Immediately, he took to social media: “We are proud to be the first altcoin, first modern blockchain platform, and first alternative [virtual machine] under the new administration,” he wrote in an X post. “MOVE is Made in America.”

Then, in media interviews throughout the day, he described the WLFI purchases as a positive sign for Movement’s trajectory: “It’s a good sign that the president of the United States’s DeFi program is purchasing MOVE,” he told CoinDesk. “It shows a good sign of faith, and good solidarity with Movement ecosystem.”

Rumors suddenly started swirling on X that Elon Musk was eyeing Movement as a potential infrastructure partner for his Department of Government Efficiency (DOGE).

Manche distanced himself from the rumor, claiming he had only heard about it when the rest of the public did. But he didn’t discourage the speculation, either. “We can’t really talk much about it,” he told CoinDesk. “Our papers have never hit the DOGE desk,” but “we work with a variety of government agencies and institutions.”

The MOVE price briefly surged by 20% within hours of the news.

The World Liberty Financial play

Manche is far from the only crypto founder to recognize the value of associating with the Trump blockchain brand.

Donald Trump announced World Liberty Financial in mid-October, during the final days of his presidential campaign. The company says it is building a crypto lending platform that advances American values, but it has yet to launch a product. Within days of its formal announcement, however, it began selling a token, WLFI.

Read more: Inside the Trump Crypto Project Linked to a $2M DeFi Hack and Former Pick-Up Artist

According to a disclaimer on the World Liberty website, Donald Trump holds a majority stake in the venture through his company, DT Marks LLC, and is entitled to around 75% of WLFI token sale proceeds. The token provides holders with a vote on the eventual platform’s direction. Currently, it is impossible to trade and has restricted sales to non-Americans and accredited U.S. investors only.

Due to these restrictions, WLFI struggled to meet its fundraising targets initially. What’s the point of buying a cryptocurrency that you can’t sell for a profit? Many in the industry—including some of the president’s own supporters—criticized the sale as a cash grab.

But Justin Sun, a Chinese-born crypto founder, was among the first to reveal how WLFI might still appeal to a very specific type of investor. On Nov. 27, he bought $30 million in the incoming president’s WLFI tokens, making him the project’s largest single investor. Sun then lobbed praise onto Trump and WLFI in a series of social media posts.

Today, Sun is perhaps best known for purchasing a banana taped to a wall for $6.2 million, but the U.S. Securities and Exchange Commission — a department now under the control of Donald Trump’s White House — previously charged him with fraud and market manipulation. The case is ongoing.

The president’s crypto company, meanwhile, has purchased millions of dollars in TRX — the native token of Sun’s TRON blockchain — and WBTC, a Bitcoin derivative with suspected ties to Sun. World Liberty also named Sun an official adviser.

Blockworks reported on Feb. 3 that World Liberty Financial was shopping around a deal: if a project buys at least $10 million worth of WLFI tokens (with a 10% fee), WLFI will buy an equivalent amount of the project’s native token​. Movement Labs and Tron denied making such agreements.

World Liberty’s investments are expected to accelerate with the establishment of a strategic reserve, but a lawyer for World Liberty Financial, Alex Golubitsky, said he could not comment on whether WLFI’s investments count as an official Trump endorsement.

The Trump family, however, seems aware of its power to move markets. On Feb. 3, shortly after World Liberty Financial reallocated a large share of its tokens into ether (ETH), the native token of Ethereum, Eric Trump tweeted, “In my opinion, its a great time to add $ETH. You can thank me later.”

He quickly edited the tweet, removing the “You can thank me later” line.

The art of the pump

Over the past several months, Rushi Manche made a concerted effort to ingratiate himself in Trump-world. He attended the crypto ball, an industry event on the eve of the inauguration that mixed figures from the administration with crypto industry leaders. He has also made frequent trips to Washington, D.C. where he has lobbied on behalf of the crypto industry with people like Zak Folkman and Chase Herro — the leaders of World Liberty Financial.

On Feb. 10, when WLFI made a second round of MOVE purchases, Manche immediately ran back the same playbook he had used a week earlier.

Within minutes, reporters received a press release from Movement’s PR team: MOVE was now “one of the most significant holdings in Trump’s portfolio,” the release read, and Manche was “available to discuss what Trump’s investment means for the project, its role in advancing blockchain, and the broader implications for the crypto industry.”

Manche again took to social media, reposting a photo of himself and Donald Trump Jr. alongside a screenshot of World Liberty’s MOVE purchases. The photo was taken at an event for Ondo, another project in World Liberty’s crypto portfolio.

“[P]olitics is the most important [go-to-market] play for crypto companies today,” Manche said in a lengthy X post a few minutes later. “[M]y sense is that the next five years will be a space race for crypto hegemony – the teams that can lock in the relationships with federal agencies, institutional capital, and world leaders are the ones that survive.”

The post drew heated debate. Some viewed Manche’s government-centric posturing as a shrewd business move. Others condemned it as a betrayal of crypto’s anti-establishment ethos — a shortsighted attempt to exploit Trump’s fame to pump a token ahead of a major product launch.

Manche is unfazed by the backlash. He likens Movement Labs’ approach to that of Cardano and Ripple — projects that, despite heavy scrutiny, have maintained strong market positions due to their deep understanding of how to earn and keep attention.

“Sure, you have anons on Twitter calling them scams,” he said. “But look who’s winning.”

He pointed to Ripple’s “XRP Army,” whose fervor has kept the project relevant despite technical critics and regulatory scrutiny. Ripple’s XRP token has topped price charts for nearly a decade, Manche said, by building “the biggest cult in the world.”

Similarly, he praised Charles Hoskinson, the outspoken founder of Cardano, for having “mastered the art of attention” and getting Cardano’s ADA token into the hands of so many investors. Hoskinson has “contributed more to the space” than the very same Ethereum developers who dismiss Cardano as “a broken blockchain,” Manche said.

“If you ask a taxi driver what they’re buying, they’ll tell you XRP, ADA — not even ETH,” said Manche. “That’s what the real people are talking about outside of our little bubble.”

As for Movement, Manche’s strategy is clear: align with Trump and grab attention, for better or worse. In his words: “Love me, hate me, just don’t forget me.”

Crypto scammers may have pocketed as much as a record $12.4 billion last year fueled, in part, by growth of so-called pig-butchering schemes, blockchain analytics firm Chainalysis said.

Fraudsters’ revenue from such schemes, in which they build up victims’ trust before convincing them to make fraudulent crypto investments and named after the practice of fattening swine before slaughter, rose 40% to at least $9.9 billion.

While law enforcement agencies worldwide have targeted such operations, scammers have refined their tactics, Chainalysis said. The scammers leverage artificial intelligence and are expanding their networks across multiple countries, becoming more professionalized, the report said. Overall scam activity has increased 24% a year on average since 2020.

Chainalysis highlighted platforms like Huione Guarantee, a peer-to-peer marketplace that, it says, functions as a “one-stop-shop” for scammers’ needs. Those services include money laundering, social media management or selling data, among others. According to Chainalysis, Huione Guarantee, received at least $375.9 million in cryptocurrency in 2024.

Fraudsters direct victims to fake investment platforms, convincing them to send funds to wallets they control. Once the money is transferred, victims are unable to withdraw it, and scammers disappear.

While authorities have made progress in tracking and shutting down fraudulent operations, the sheer volume of scams shows the challenges ahead. With the continued rise of AI-powered deception, Chainalysis warns that more aggressive countermeasures may be needed to curb crypto-related fraud.

Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk’s full AI Policy.

Which market offers the most favorable environment for virtual assets? This distinction remains highly contested, with various financial centers competing to become leading hubs for digital assets, aiming to attract innovation, investment and jobs. In Asia, two of the most prominent players in this space are Hong Kong and Singapore.

Hong Kong’s regulatory environment will be the lynchpin to its success. The right regime will not only provide guidelines to stakeholders but attract them in the first place. And though entrepreneurs and corporations are often the focus of such policy-making, regulators need to give as much attention to retail and institutional investors. After all, investors provide the financial backing that businesses need to succeed in what is typically a capital-intensive market.

Why investors need a safe and regulated crypto market

Investors across the world have suffered the brunt of negative effects from the Wild West days of crypto. We see this pattern at play from Mt. Gox to FTX and other exchanges in between: When they go belly up due to a hack or other issues, investors have little recourse or hope of ever getting their funds back.

The same is true for individual coins: the failure of some tokens, like TerraUSD and Luna, has led to the financial ruin of many investors. And there are other scammers across the world of crypto, from pig butchering operators passing off fake mining operations, to phishing scams targeting users of regulated crypto exchanges, to schemers who even purport to specialize in the recovery of these funds.

Hong Kong’s competitive edge in digital asset regulation

Although the digital assets sector has been unforgiving to investors, it is the role of regulators in Hong Kong to make sure that crypto becomes investor-friendly.

The regulators here are already off to a great start. The main agency responsible is the Securities and Futures Commission, which regulates and licenses what it deems to be virtual asset trading platforms (VATPs). These businesses are subject to strict policies that protect investors, including everything from KYC and AML to custodianship and risk disclosures.

While many markets have enacted frameworks for cryptocurrency, Hong Kong has one major advantage: speed. For example, Hong Kong was one of the first markets in the Asia Pacific region to approve bitcoin and ether exchange-traded funds (ETFs) with in-kind subscription, a mechanism that allows investors to directly subscribe to ETF shares using the underlying crypto assets instead of cash. Beyond that, the territory is constantly scanning the horizon for other possible policies to refine its regulatory guidelines.

Hong Kong also has a robust sandbox program for stablecoins and discretionary accounts that it is regularly improving upon. To this end, the SFC has approved several licensed fund managers to provide discretionary management account services for virtual assets. This feature enables fund managers to execute the unique investment mandate of each investor on pre-approved exchanges from end-to-end, including buying and selling virtual assets, as well as provide other services like derivatives trading, reporting, and portfolio monitoring and rebalancing.

How Hong Kong can strengthen its crypto framework

To further innovate upon its robust foundational regulatory framework, Hong Kong can focus on these three pillars.

1. Market education. It’s not enough for regulators to give investors access to digital assets — they must also provide educational resources to maximize their investments. Digital assets, after all, come with unique risks. The most obvious is volatility, but there are others, such as security, liquidity and sustainability.

Hong Kong regulators should provide education about digital assets and their risks, and continue requiring its VATPs to do the same. After an assessment of each prospective investor, VATPs must provide not only disclosures and warnings but also educational materials to improve investors’ understanding of digital assets. Informed and educated investors will benefit the individual VATPs and Hong Kong as a whole, resulting in fewer failures and similar issues to deal with.

2. Investor-friendly assets and features. While digital assets are often discussed in monolithic terms, coins are very different when examined from an investor standpoint. On one end, there are digital assets that are not investor-friendly. Examples include memecoins that have extreme volatility, such as Shiba Inu or Pepe Coin, or privacy coins like Monero.

On the other end, there are digital assets that are very investor-friendly. The most notable recent example is spot bitcoin exchange-traded funds (ETFs), which give investors exposure to $BTC without having to go through the hassle of buying it directly, jotting down their private keys and securing it in a cold or hot wallet. In addition to encouraging VATPs to focus on similar investor-friendly assets, Hong Kong should also authorize the development of platform features that simplify and streamline the investor experience. Their north star is clear: What assets or features will make it easiest for investors to support projects and enterprises in crypto?

3. Transparent regulatory environment. Regulatory clarity is not always a priority of agencies. We saw this principle at play in the United States, where the Securities and Exchange Commission (SEC) began prosecuting crypto exchanges and other institutions for offering what it deemed to be unregistered securities. The law cited for these violations was not a crypto framework, but the Howey Test, which originated from a 1946 Supreme Court case involving the SEC. This enforcement naturally discouraged other crypto investors, businesses and stakeholders from setting up shop in the U.S. because they were afraid of getting punished due to the lack of regulatory clarity. While President Trump is establishing a pro-crypto administration, the damage may already be done: Businesses in the space may prioritize other markets.

Hong Kong should continue its culture of transparency and collaboration, as evident in the recent proposal for a Stablecoins Bill by the Hong Kong Monetary Authority (HKMA). While the bill only made the headlines recently, the HKMA had been consulting with stakeholders about its structure for more than a year. This transparency — organizations know what laws may be coming, how they will be applied and even have a say in their execution — will allow investors and businesses to align their own plans with what will be allowed in the regulatory environment.

Poised to lead Asia’s crypto future

Crypto regulations are racing ahead in 2025, but Hong Kong can distinguish its own crypto regime by emphasizing market education for all investors, investor-friendly assets and exchange features, and a transparent regulatory environment that empowers stakeholders to plan their actions well in advance of policy changes. If Hong Kong can continue this three-pronged approach, it will seize the mantle as Asia’s premier crypto hub — not only because it’s investor-friendly, but because it’s investor-first.

In today’s issue, we get ready for tax time as Anthony Tuths from KPMG provides an overview of crypto tax preparation and the rules to follow.

Then, Layne Nadeau from NVAL answers questions about taxes and NFTs in Ask and Expert.

– Sarah Morton

Tax time – What You Need To Know About Crypto Taxes

The 2024 tax year has come to a close, and tax filing season is now upon us. If you’ve been trading crypto, there are some things you need to consider. The first is, be sure not to waste time. While a large U.S. centralized exchange may provide you with an IRS Form 1099, other exchanges likely will not, so you will need time to organize your own tax records. Moreover, even if the exchange provides you with a 1099, it likely will not have cost basis information. And most non-U.S. exchanges and DeFi protocols will not provide you with tax information.

In order to compute accurate gains and losses, you will need to have accurate trading records for each trade, including the cost basis of any tokens sold. You’ll likely need to pull this information from the exchange if you failed to keep contemporaneous records while trading in 2024. Also note that going forward, for trading in 2025 and beyond, you are required to use “tax lot relief” methods — i.e., select which portion of fungible tokens were sold and their related tax basis, even if using first-in-first-out (FIFO) methodology, on a wallet-by-wallet basis. For example, if you sold from wallet number 4, you can’t identify a token from wallet number 7 as the token sold; you can only identify a tax lot from wallet number 4. As a result, you may want to consider consolidating wallets. Also, per IRS Rule 2024-28, tax lot allocations were to be made before your first trade in 2025.

Aside from good record keeping and tax basis tracking, all forms of income and expenditures in crypto should be considered. For example, did you receive an airdrop of a token that had value at the time of the drop? Remember that ordinary income is equal to the fair market value of the token as of the time you had the power to sell it, whether you did so or not (see IRS Rule 2019-24). That income inclusion amount then becomes your tax basis, and a future disposition will result in a capital gain or loss based on that tax basis.

Also, did you earn crypto for services you provided as an employee or independent contractor? In that case, you had reportable income equal to the fair market value of the crypto received. That income is also subject to wage withholding or self-employment tax.

Heading into the final months of 2024, you may have sold some of your digital assets trading at a loss (i.e., loss harvesting). If so, those losses can be used to offset your taxable gains and reduce your tax liability. This is true even if you bought the same tokens back shortly after selling them since there is currently no wash sale rule for buying and selling crypto. Remember this during 2025 to reduce your future taxes.

Even after loss harvesting, did you still end up with taxable gains for 2024? You may still be able to contribute to your IRA if you haven’t done so already in order to create a deduction for 2024. In most cases, you have until April 15th to do this. And while you can’t contribute crypto to an IRA, if you have a self-directed IRA, you can contribute fiat to it and then use those funds to purchase crypto.

Lastly, did you buy a bitcoin or ether ETF? Note that even if you didn’t sell the ETF in 2024, you may still have tax liability. This is because the ETFs are structured as grantor trusts, and they sell small amounts of crypto each month to fund the management fees. Each ETP publishes a tax report for the year and posts it on its website. This report tells you how to calculate your gains/losses for the year as a trust unitholder. These tax gains and losses are currently reportable by you.

Good luck tax filing!!

–Anthony Tuths, digital asset practice leader tax principle alternative investments, KPMG LLP

Ask an Expert

Q: How are non–fungible tokens (NFTs) treated for tax purposes?

A: In many jurisdictions, NFTs are considered digital assets and are subject to the same tax rules as cryptocurrencies. Some jurisdictions look past this simplification at the underlying assets associated with the NFT and apply the appropriate tax treatment for those assets (e.g. Money Market Funds, Art & Collectibles, Private Debt, etc.). Consulting a tax accounting professional is recommended.

Q: Can “Floor Price” be used to calculate the value of non-fungible assets for tax purposes?

A: No, a floor price is not accepted by formal accounting or tax standards. A service is required that uses accepted accounting methods, such as market comparisons, to calculate an acceptable fair market value. Accounting providers that specialize in digital assets will have these service providers in their partner network.

Q: Can a tax loss be realized for NFTs that have lost their value/market?

A: Yes, if selling the token is no longer an option there are services (e.g. UnsellableNFTs.com) that will “purchase” illiquid NFTs (for a nominal fee), allowing the capital loss to be booked.

Due to the lack of guidance from most tax authorities on this topic, a potentially safer alternative is to send your NFT to a burn wallet like the standard ETH burn address.

–Layne Nadeau, CEO, NVAL

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