August 10, 2023
By Anjali Kochhar
Hong Kong’s Securities and Futures Commission (SFC) has cautioned investors regarding false claims made by certain cryptocurrency trading platforms about their compliance with the city’s new virtual asset regulatory framework. The SFC emphasised that these platforms falsely assert that they have submitted applications to operate legally under the SFC’s jurisdiction. In a statement issued on Monday, the regulator highlighted that this misleading information aimed to create a deceptive sense of security and induce trading in virtual assets. The Anti-Money Laundering and Counter-Terrorist Financing Ordinance deems such actions an offence.
The announcement comes after Hong Kong embarked on an initiative last October to establish itself as a global cryptocurrency hub by introducing regulations allowing licensed centralised crypto exchanges to serve retail customers. Licensing prerequisites encompass various aspects such as cybersecurity, asset custody, user onboarding, and corporate governance. A one-year grace period, effective from June 1, has been granted to existing exchanges to align with the SFC’s guidelines.
However, during this transition phase, certain platforms catering to retail users are offering products and services that breach the new regulatory regime, including crypto derivatives. The SFC also indicated that it might take a critical view of non-compliance when assessing license applications. The regulator cautioned that the public should be cautious since platforms publicly expressing intent to apply for an SFC license may not actually follow through.
Investors trading on unregulated virtual asset exchanges face considerable risks, as their investments could be entirely lost due to platform closure, hacking incidents, or misappropriation of assets. Prominent crypto exchanges like OKX and Huobi, both founded in mainland China and among the largest globally, have declared intentions to secure licenses in Hong Kong.
The SFC has yet to issue any licenses under its new virtual asset framework but has granted approval for two local firms, HashKey and OSL, to offer specific digital asset trading services to professional investors. These firms recently disclosed that their licenses were upgraded to include services for retail users. HashKey and OSL intend to initially provide bitcoin and ethereum trading, with plans to develop new mobile applications for retail users.
Investors are encouraged to exercise caution and conduct thorough due diligence while engaging with cryptocurrency trading platforms to mitigate potential risks and ensure compliance with the evolving regulatory landscape.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
