Hong Kong Govt official elaborates on regulation of virtual asset investment activities
Regarding the sale of mining machines, a trader who engages in unfair trade practices faces a fine and imprisonment for five years.
Hong Kong’s Secretary for Financial Services and the Treasury, Mr James Lau, has earlier today replied to a question related to the regulation of virtual asset investment activities.
Mr James Lau noted that in recent years, crimes relating to virtual assets have been on the rise, mainly involving deception and blackmail. In 2018, there were 324 cases of virtual assets-related crimes reported to the Police, while in 2016 and 2017, there were 67 and 50 cases of Bitcoin-related cases reported respectively (the Police only has data relating to Bitcoin in the concerned period).
Regarding investment fraud cases in 2016, 2017 and 2018, the number of cases received by the Police each year was 134, 137 and 212 respectively. Fraudsters made use of different kinds of investment products to lure victims with claims of high returns and low risks. For instance, early this year the Police arrested three persons suspected of deceiving over 20 victims to invest in virtual assets-related computer equipment and services, with the investments amounting to HK$3.7 million.
The Securities and Futures Commission (SFC) has issued press statements in respect of regulatory actions taken in respect of activities involving cryptocurrencies. For instance, in February 2018 noting that it had taken regulatory actions against seven cryptocurrency exchanges and seven issuers of initial coin offerings (ICOs) to warn them of the implications for conducting activities involving cryptocurrencies which were “securities” as defined in the Securities and Futures Ordinance (SFO) without a licence.
Regarding the sale of mining machines or other products related to virtual assets, Mr James Lau explains that a trader who, in the course of business, engages in unfair trade practices prohibited under the Trade Descriptions Ordinance (TDO), including “false trade descriptions”, “misleading omissions”, “aggressive commercial practices”, “bait advertising”, “bait-and-switch”, and “wrongly accepting payment”, commits an offence. This may result in a maximum fine of $500,000 and imprisonment for five years.
Finally, Mr James Lau stressed that, in November 2018, the SFC announced an exploratory regulatory approach under the sandbox environment to determine whether it is suitable to license and regulate virtual assets platforms using its existing power. SFC would decide whether, and if so, how to regulate virtual assets trading platforms after the exploratory stage.
The regulator is currently in discussion with some virtual assets trading platform operators so as to understand more about their operations.