SFC steps up information dissemination and investor education on VATPs

The Securities and Futures Commission of Hong Kong (SFC) has issued a press statement to inform that it is taking further steps to reinforce information dissemination and investor education regarding unregulated virtual asset trading platforms (VATPs). This move comes as a consequence to recent concerns about the activities of unregulated VATPs, particularly of JPEX, an unregulated crypto-asset trading platform, against which there are ongoing investigations following suspicions of embezzling a huge amount of money.
While the SFC recognizes the potential benefits of digital finance and virtual asset activities, it also acknowledges the associated risks, such as decentralization, money laundering, and investor protection issues. Since 2017, the SFC has been one of the first major financial regulators to introduce a comprehensive framework to regulate various VA-related activities. Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the SFC has implemented a new licensing regime for centralized VATPs to enhance its supervision powers. SFC-licensed VATPs are subject to robust governance measures to safeguard investor interests, including safe custody of assets, prevention of market manipulation, and avoidance of conflicts of interest. The SFC has been closely monitoring VA activities in Hong Kong and gathers information from various sources, including market news, media reports, industry dialogues, complaints, and social media.
To educate and warn investors about the risks of trading on unregulated platforms, the SFC and its subsidiary, the Investor and Financial Education Council (IFEC), are working closely together. The recent incident involving JPEX highlights the risks associated with unregulated VATPs and the need for proper regulation to maintain market confidence. The SFC plans to publish various lists related to VATPs to ensure clear and timely dissemination of information to (potential) investors. These lists include
– licensed VATPs,
– closing-down VATPs,
– deemed licensed VATPs, and
– VATP applicants.
Additionally, the SFC will enhance and issue a dedicated list of suspicious VATPs to help the public identify such platforms more easily. The SFC also aims to launch a public campaign in collaboration with the IFEC to raise awareness about fraud and enhance investor education through mass media, social media, and education talks.
The SFC will continue to strengthen its intelligence gathering process and take follow-up and enforcement actions against suspicious VATPs that may have violated the law. The SFC encourages the public to file complaints regarding any suspicious activities they encounter, as public complaints are a valuable source of intelligence. The SFC plans to explore the establishment of a dedicated channel with the Police to share information on suspicious activities and investigate the JPEX incident. In line with the principle of same business, same risks, same rules, the SFC will work with the HKSAR Government to regularly review the regulatory regime and consider timely measures in light of new market developments. This may include the regulation of VA-related businesses beyond VATPs.