On June 27, the Securities and Futures Commission of Hong Kong published its yearly report for 2017-2018, in which it provided some insights into its new policy on ICOs and cryptocurrencies. The organization reported that the new technologies offer convenience for investors but come with risks. They keep a keen look on cryptocurrencies and initial coin offerings, intervening where appropriate. They also initiated the SFC regulatory sandbox for qualified companies to conduct regulated activities utilizing monetary technologies.
What is contained in the SFC report
From the nature of the report, it looks like the SFC only wants to ensure that investors do not come upon risks related to scams and cyber-attacks that could cripple trades. In addition, the regulator said that it would remain vigilant in policing the market and look at how it generates over time.
On September 2017, the SFC’s first statement and circular on ICOs was released. December 2017, a second circular published on the regulatory needs for cryptocurrency operators. The SFC gave another statement in February after taking action against crypto-related firms.
The SFC halted Black Cell Technology’s ICO in March on the regulations that it constituted an unlicensed security, with the firm responsible for refunding investors in its token.
In consideration of Hong Kong’s history as a hyper-liberal city, people do not expect it to take any kind of harsh measures against the idea of cryptocurrency or ICOs. This is not a guarantee though because South Korea, which is another liberal tiger in the Asia-Pacific region, put an end to ICOs just as its local ICO market began to find its footing.
Operation and management according to SFC
On page eight of the report, there is a small footnote pointing out to institution and operators that cryptocurrencies are defined by the city-state as securities and therefore fall under the jurisdiction of securities laws in Hong Kong.
There were also findings that the SFC took regulatory operation against a number of trades in February this year due to inadequacies in their cybersecurity practices. As the report further reads, the organization’s words appear like a hidden warning that there may be some mismanagement of ICOs in the near future. However, there is nothing showing that the fundraising practice would ever be prohibited.
A study by the Wall Street Journal that was published on May, showd that after finding fake teams and copy-pasted whitepapers, up to a fifth of involvement of ICOs are possible scams. Protecting would-be investors who are just getting into the market from these scams may indeed require some regulation.