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Introduction
In response to growing concerns regarding unregulated virtual asset trading platforms (“VATPs”), on 25 September 2023, the Securities and Futures Commission (the “SFC”) announced the introduction of a series of measures aimed at reinforcing information dissemination and investor education.
Recognising both the potential benefits and risks associated with virtual asset activities, the SFC has been at the forefront of implementing a comprehensive regulatory framework since 2017. The SFC has also been monitoring virtual asset activities in Hong Kong to detect possible breaches of law under its regulatory remit through gathering information from different sources, including market news, media reports, frequent dialogues with the industry, complaints and social media. Where appropriate, the SFC would put entities on the Alert List and refer cases to the Police for further investigation.
New Measures
The SFC has been working closely with its subsidiary, the Investor and Financial Education Council (the “IFEC”), to educate and warn investors about the risks associated with trading on unregulated virtual asset platforms. The recent JPEX incident highlighted the importance of proper regulation and information dissemination to maintain market confidence. In light of this, the SFC will be implementing the following measures:
| Publishing VATP lists | To ensure that information is disseminated in a clear, transparent and timely manner, the SFC will publish various lists, including:
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| Issuing a dedicated list of suspicious VATPs | The SFC will enhance and prominently display a dedicated list of suspicious VATPs on its website. This list will help the public identify potentially fraudulent platforms and raise awareness about the associated risks. The SFC will also consider providing additional information about these VATPs to alert investors at an earlier stage.
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| Launching public awareness campaign | The SFC and the IFEC will launch a public campaign to raise awareness and educate the public about guarding against fraud. Through mass media, social media platforms, and education talks, they aim to enhance understanding of the risks associated with virtual assets and potential fraudulent activities.
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| Strengthening intelligence gathering and enforcement | The SFC will continue to strengthen its intelligence gathering process related to virtual asset businesses. It will take follow-up actions and enforcement actions against suspicious VATPs that may have violated the law. The SFC encourages the public to report any suspicious activities through its Online Complaint Form, as public complaints serve as a valuable source of intelligence.
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Analysis and takeaways
With its comprehensive regulatory framework and proactive approach, the SFC is committed to protecting investors’ interests, maintaining market confidence, and fostering a sustainable and responsible development of the Web3 ecosystem in Hong Kong. By implementing stringent measures, enhancing investor education, and collaborating with other regulators and stakeholders, the SFC aims to create a well-regulated environment for virtual asset trading and to mitigate any potential risks.
Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.
This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.