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Hong Kong SFC strengthens investor education amid concerns about unregulated virtual asset trading platforms.

The Securities and Futures Commission (SFC) of Hong Kong is putting into effect a number of strengthened measures to support investor education and information dissemination in response to recent worries about unregulated virtual asset trading platforms (VATPs).

The announcement comes soon after a well-known case involving JPEX, an unregistered cryptocurrency exchange that SFC has charged with deceiving investors. Without the required licenses, it is believed that JPEX was actively selling goods and services throughout Hong Kong through “social media influencers and key opinion leaders.”

The SFC has already asked that JPEX promoters stop marketing their product and informed pertinent parties and over-the-counter virtual asset money changers of the SFC’s suspicions and concerns.

In September, Hong Kong police also detained more than ten people in connection with the virtual asset trading platform investigation, including internet influencers and JPEX workers, on suspicion of conspiring to commit fraud.

As per the SFC, JPEX never made any approach to the regulator to get a license of any kind. The regulator clarified that no JPEX group company holds a license from the SFC or has submitted an application to the SFC to do so in order to run a virtual asset trading platform in Hong Kong.

The SFC clarified that it has acknowledged the numerous advantages that virtual asset and digital finance operations might have for the local financial markets. On the other hand, the regulator is implementing a number of additional measures in response to the identification of related risks, such as decentralization, money laundering, and investor protection difficulties.

SFC

Putting a stop to unauthorized conduct

The Anti-Money Laundering and Counter-Terrorist Financing Ordinance, which went into full force on June 1, 2023, filled the void left by the previous licensing system for centralised VATPs, granting the SFC full authority over VATP licensing and supervision.

Strong governance practices that protect investors’ interests include preventing market manipulation and abuse, avoiding conflicts of interest, and maintaining secure custody of assets for SFC-licensed VATPs.

Publicating listings of virtual asset trading platforms (VATPs) is one of the SFC’s new measures to guarantee that all information disclosed is understandable and open. Proposals consist of:

  • a list of VATPs with licenses
  • a list of shutting VATPs that includes the names of VATPs that must close within a certain time frame as mandated by law
  • A list of VATPs that are regarded licensed
  • a list of candidates for VATP

Additionally, the SFC intends to publish a specific list of suspect VATPs that will be publicly available on the SFC website in order to raise awareness and assist the public in identifying suspicious VATPs operating in Hong Kong.

The SFC and the Investor and Financial Education Council (IFEC) also disclosed plans to begin a new public awareness campaign to increase knowledge about preventing fraud. Through the use of social media, mainstream media, and educational lectures, they seek to further enhance investor education and make it easier for the general public to comprehend the dangers of virtual assistants (VAs) and possible fraud.

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