Hong Kong Regulator Warns Cryptocurrency Exchanges And ICO Issuers

Hong Kong’s securities regulator is increasing its examination of local crypto trades by ordering them not to exchange digital currencies that are regarded as ‘securities’.

Following a past notice where Hong Kong’s Securities and Futures Commission reported that some digital tokens offered through initial coin offering (ICO) deals would be regarded as securities, the regulator has now moved to make a move against various household digital money trades and ICO issuers.

With an announcement on Friday, the SFC uncovered it had sent letters to seven unnamed digital currency trades working in or in connection with Hong Kong, cautioning them not to exchange digital currencies deemed as ‘securities’ under law, without a permit.

Taking note of that various Hong Kong digital currency trades rank in the best 20 by every day exchanging volume, the SFC said the exchange operators – under investigation – ‘either confirmed that they did not provide trading services for such cryptocurrencies or took immediate rectification measures, including removing relevant cryptocurrencies from their platforms.’ Additionally, the SFC cautioned of disciplinary actions against trades ignoring the classification of ‘securities’ under law, and also repeat wrongdoers.

Independently, the regulator likewise uncovered it had sent letters to seven ICO issuers which saw ‘most of them’ affirm compliance to regulations or ‘immediately cased to offer tokens to Hong Kong investors.’

The regulator included:

“The SFC will continue to closely monitor ICOs, and will not tolerate any violations of the securities laws of Hong Kong.”

The regulator’s revelations comes within a week of Hong Kong authorities launching a public campaign to educate and warn investors of investments risks in cryptocurrencies and ICOs.

“We will continue to police the market and enforce when necessary,” added SFC chief executive Ashley Alder. “But we are also urging market professionals to do proper gatekeeping to prevent frauds or dubious fundraising and to assist us in ensuring compliance with the law.”

Further, the SFC cautioned investors that putting away fiat or digital currencies with unregulated trades leaves them open to hacking and mismanagement risks, referring to investors complaints against digital currency trades and ICO issuers.

‘The SFC may not have jurisdiction over cryptocurrency exchanges and ICO issuers if they have no nexus with Hong Kong or do not provide trading services for cryptocurrencies which are “securities” or “futures contracts”,’ the regulator said, adding: ‘If, however, there is suspicion of fraud, the SFC is open to refer cases to the Police for investigation.’


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