Hong Kong regulator warns ‘improper practices’ by crypto exchanges can be ‘criminal’

Hong Kong securities regulator warned today that it had spotted some unlicensed cryptocurrency exchanges engaging in “improper practices,” and that conducting unlicensed activities is a “criminal offence” in the city.

The Securities and Futures Commission said in a statement that some unlicensed crypto trading platforms claim to have submitted license applications to the SFC “when in fact they have not done so.”

“It is an offence for any person to make a fraudulent or reckless misrepresentation for the purpose of inducing another person to trade in virtual assets,” the SFC said.

The regulator also warned that license applicants who violate relevant regulations during a transitional period may not be granted a license.

“It has come to the attention of the SFC that, anticipating the transitional arrangements, some unlicensed VATPs set up new entities to provide virtual asset services in Hong Kong,” the regulator said. 

“For example, they may, under new or existing entities, launch certain virtual assets for trading by retail clients, trading services in virtual asset derivatives, or arrangements involving virtual assets such as virtual asset ‘deposits,’ ‘savings” or ‘earnings’ which are not allowed under the new regime,” it added.

Hong Kong’s new licensing regime

Unlike its neighboring Chinese mainland’s broader crackdown on cryptocurrencies, Hong Kong has rolled out the welcome mat for crypto firms this year — even going so far as encouraging banks to work with them.

In October, Hong Kong authorities released a series of policy statements about cryptocurrencies with the goal of strengthening its position as a global financial center. In December, Hong Kong’s Legislative Council passed an amendment introducing a full licensing regime for virtual asset service providers.

Just last week, HashKey and OSL became the first two exchanges to obtain licenses to offer retail trading under Hong Kong’s new licensing regime that kicked off on June 1.