Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Bob Williams on how stricter crypto regulations in Asia place more personal responsibility on senior executives, making strong governance and D&O insurance essential.
- FBI’s Haidy Grigsby on how crypto scams are increasingly targeting experienced investors by building trust and tricking them into making larger deposits until their money is gone.
- Top headlines institutions should be aware of by Francisco Rodrigues.
- Hyperliquid’s TradFi bet is now 40% of its own volume in the Chart of the Week.
-Alexandra Levis
Expert insight
Asia’s crackdown on digital assets: accountability gets personal
By Bob Williams, FinTech, Digital Assets and Blockchain Advisory Leader (Asia/Pacific), Lockton Companies
A new wave of digital asset regulations across Asia is increasing pressure on trading platforms and asset managers to strengthen governance – and to reassess their directors’ and officers’ (D&O) liability insurance schemes.
In recent months, three leading digital asset hubs – Hong Kong, Singapore and South Korea – have announced plans to refine their respective regulatory frameworks. As regulatory expectations increase and senior management’s personal accountability becomes clearer, platform operators need to stay abreast of these developments and assess whether their existing risk transfer strategies remain fit for purpose.
Hong Kong: expanding accountability beyond governance
In August 2025, Hong Kong’s Securities and Futures Commission (SFC) issued a circular to licensed operators of virtual asset trading platforms clarifying the responsibilities of senior management regarding the safekeeping of clients’ virtual assets. The circular reinforces expectations for governance, internal controls and effective oversight, signaling a continuous shift towards personal accountability for directors and senior management.
A new consideration from the SFC’s consultation process is whether providers of virtual asset management services should be permitted to rely on non-SFC regulated or offshore custodian banks. From an insurance perspective, the availability of cover for virtual asset risks is closely related to the robustness of custody arrangements, including security controls, operational resilience and asset protection standards. To date, insurance capacity has largely been underpinned by the prescriptive requirements imposed on SFC-regulated custodians and platforms.
If alternative custodian models are permitted, it will be critical to ensure that non-regulated or offshore custodian banks are held to similar standards, including appropriate insurance coverage. Without alignment, companies that have invested heavily to meet Hong Kong’s regulatory and insurance expectations may face a competitive disadvantage, while the goal of improving investor protection and market integrity may be undermined.
Singapore: strengthening the competence of senior management
In 2025, Singapore introduced licensing requirements for digital token service providers serving overseas customers only, bringing a wider range of businesses within the Monetary Authority of Singapore’s regulatory perimeter.
Under the licensing guidelines, the competence and suitability of key personnel are key entry criteria. Senior management is expected to demonstrate a clear understanding of the regulatory framework and to exercise effective oversight and control over business activities and personnel.
As regulatory expectations increase, so does the personal exposure of directors and officers. In this context, D&O insurance remains a critical component of a firm’s overall risk management framework, helping to protect personal assets in the event of claims or regulatory actions arising from alleged management or supervisory failures.
South Korea: Preparing for Digital Asset Basic Act
South Korea is pursuing a more expansive regulatory overhaul through the proposed Digital Asset Basic Act, introduced to the National Assembly in June 2025. The bill seeks to formalize the digital asset market by regulating issuance, trading practices and distributions, while introducing new governance structures around asset listing and delisting decisions.
These impending changes would significantly increase compliance obligations for trading platforms and related service providers. In this environment, D&O insurance plays an important role in protecting directors and officers from the financial consequences of legal actions, investigations or claims arising from alleged wrongdoing.
Navigating regulatory complexity with D&O insurance
Across Hong Kong, Singapore and South Korea, regulators are already refining sophisticated frameworks to address the evolving risks of digital assets. This development reflects a wider global trend towards intensified regulatory scrutiny and increased expectations of senior management accountability.
For companies operating in the region, this means proactively reviewing governance structures, custodial arrangements and insurance programs to ensure management is adequately protected against new liabilities. D&O insurance is no longer a secondary consideration – it is a core element of responsible risk management in an increasingly regulated digital asset landscape.
Enlightened perspectives
Crypto scams don’t just target the uninformed
By Haidy Grigsby, Special Agent, Cyber Crimes and Digital Evidence Unit, Tennessee Bureau of Investigation
A common assumption is that crypto scams prey on the uninformed. While this is often the case in financial fraud, crypto-related scams are increasingly catching seasoned investors, retired professionals and former market participants off guard with increasing frequency.
In my work with the FBI, I recently met with a retired businessman who fit exactly that profile. He met a young woman online who claimed to know someone involved in crypto trading. He was told that he had been selected as a consultant because of his experience. His case illustrates a strategy that we now see often.
The first contact often begins with a text message with the wrong number, a LinkedIn message or a social media outreach. What starts out as professional often turns personal or romantic, a tactic known as “pig slaughter.” Scammers flatter expertise, create exclusivity, and get the target to shift the conversation to encrypted apps. In this case, “she” said WhatsApp was easier for her.
Leveraging knowledge of legitimate infrastructure, victims are instructed to open accounts on real exchanges and then use self-managed wallets to access external websites through native Web3 browsers. Because they click in a trusted app, they often don’t realize they’ve left it.
These fraudulent markets mimic real ones with a twist: Unlike real markets, these platforms allow one daily trade at a given time, ostensibly to capture optimal volatility. Victims choose long or short, allocate funds and confirm a short trade lasting seconds or minutes. The scammer will often claim to contribute their own funds, which reinforces the trust and illusion of shared risk.
Balances grow and profits appear real. In reality, no trading takes place – the site is controlled by the operation and the returns are simply numbers entered by the scammer on their site.
To build credibility, victims are encouraged to withdraw a small amount after a “winning” trade. The payout appears to be successfully processed, but is funded with cryptocurrency stolen from other victims and is intended to encourage larger future deposits. “I took a profit. It had to be right,” the retired trader said in frustration.
The websites often change domains and branding, and victims are told that the company is merging, upgrading or rebranding. In reality, these changes are occurring due to law enforcement crackdowns, and victims are simply being redirected to “new trading platforms.”
When victims attempt larger payouts, the narrative shifts: regulatory holds, tax prepayments, liquidity verification thresholds or tier upgrades. Each explanation is paired with urgent demands for more funds.
Convincing the victims of the truth remains one of the biggest challenges. When I spoke to the retired businessman, it was difficult to convince him that I was a law enforcement officer and that he had been dealing with a criminal organization, not an individual. No one wants to believe that the person they built trust in and gave significant sums of money to never existed. This retired businessman was left to face his family, admit he had been defrauded and ask for help with basic living expenses. By the time he accepted reality, his retirement savings were already gone: assets had been transferred overseas, laundered and liquidated.
Source: FBI Internet Crime Complaint Center (IC3), Report on Internet Crime 2025p. 53, https://www.ic3.gov/AnnualReport/Reports/2025_IC3Report.pdf
The FBI’s 2024 data shows that losses increase with age, likely reflecting the fact that older individuals have more accumulated wealth than those in their 20s.
Victims collect evidence: phone numbers, accounts, photos and websites – most of which turns out to be stolen, fake or AI-generated. Despite the difficulties in apprehending the perpetrators of these sophisticated schemes, law enforcement continues to pursue these cases. Anyone affected should cease all communications and report the incident to local law enforcement, IC3.gov and Chainabuse.com.
This week’s headlines
– By Francisco Rodrigues
This week’s headlines show that institutional adoption has continued to grow in the cryptocurrency space, but old dangers remain. Protocol exploitation, state-sponsored attacks, and technological disruption remain active threats.
Chart of the week
Hyperliquid’s TradFi stake is now 40% of its own volume
Hyperliquid’s HIP-3 has scaled from ~$115 million in its first week (October 2025) to a peak of $17.8 billion/week, now consistently representing 35-40% of total protocol volume. Despite launching as a crypto-adjacent product, HIP-3 is overwhelmingly a TradFi venue, with Commodities alone driving ~60% of volume and pure crypto categories accounting for only ~12%. The total volume (core + HIP 3) continues to decline since the peak in early March 2026, with the HYPE price now following the same trend.
Listen. Read. Clock. Engage.
- Listen: Jennifer Sanasie is joined by Bloomberg Intelligence Senior Analyst James Seyffart to break down what Morgan Stanley’s bitcoin ETF could mean for institutional flows, fee competition and the next phase of crypto adoption.
- Read: In Crypto for Advisors, Paul Frost-Smith, CEO of Komainu, covers how institutional crypto is converging with traditional finance, but speed can introduce risk if legal and compliance layers aren’t aligned. Then Sam Boboev of “Fintech Wrap Up” describes in “Ask an Expert” the main coordination risks institutions need to address.
- Clock: Jennifer Sanasie hosts NYSE Public Keys. Christopher Perkins discusses the recent acquisition of Franklin Templeton and the new “Franklin Crypto,” Superstate CEO Robert Leshner and Invesco’s Kathleen Wrynn break up their partnership, and NYSE Senior Market Strategist Michael Reinking, CFA unpacks the macro environment.
- Engage: Have you bought Consensus Miami tickets yet? More speakers have been added to the agenda! Surrounding Consensus is an institutional summit, an advisor-focused “Wealth Management Day,” more than 100 related events, and much, much more.
Looking for more? Receive the latest crypto news from Pakinomist.com and market updates from Pakinomist.com/institutions.
Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc., CoinDesk Indices, or its owners and affiliates.
