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Hong Kong’s Securities and Futures Commission (SFC) has warned investors that crypto investment products offering high interest returns and guaranteed additional assets at fixed rates are risky, as there are few investor protection measures in place.
The SFC said that the “vast majority” of these platforms offering said products remain unregulated, and their “financial soundness and competence” are not subject to any regulation such as prudential regulation.
“Whilst some VA (virtual assets) Arrangements are commonly labelled or marketed as “deposits” or “savings” products, they are not regulated and are not the same as bank deposits. Investors are not afforded with any form of protection,” the SFC said in an announcement Tuesday.
“The SFC wishes to remind investors of the significant risks associated with investing in these types of VA arrangements. Investors may suffer significant or even total loss, especially in the event of fraud or collapse of a VA platform as evident in the recent fallout of a number of VA platforms,” it added.
The SFC also warned that these platforms may be classified as an unauthorised “collective investment scheme (CIS),” and it is an offence to advertise them to the general public.
Last month, the Hong Kong SAR Government set out its policy stance and approach towards developing a vibrant sector and ecosystem for virtual assets (VA) in Hong Kong in a post on its official blog, as the city moves towards legalizing crypto trading for retail investors and position itself as a hub for digital assets.
Among the city’s plans are a new licensing regime for virtual asset service providers, tokenization of green bonds, stablecoins, experimental NFT offerings, and retail trading of digital assets. It is also considering property rights for tokenized assets and the legality of smart contracts, so as to provide a solid legal foundation for their development.
Last week, Nikkei Asia reported that three asset management companies – CSOP Asset Management, Samsung Asset Management, and Mirae Asset Global Investments – have applied with the SFC to launch ETFs (exchange-traded funds) tracking cryptocurrency futures.
No application has been approved yet, but sources have told Nikkei Asia that these companies have received regulatory feedback, with the SFC keen on focusing on investor protection. One source also noted that applications for ETF products would likely take up to three months to process.
The string of applications comes after the SFC announced in October that it could allow retail investors to trade ETFs linked to cryptocurrencies.