Hong Kong securities regulator warns of digital currency investment risks

Financial regulators in Hong Kong have issued an alert to investors to be aware of unauthorized digital currency investment schemes, which could reportedly constitute a type of collective investment scheme (CIS).

CIS cannot be offered for public sale in Hong Kong except with the express permission of the country’s Securities and Futures Commission (SFC). Unauthorized CIS offers without the appropriate licensing or registration constitute a criminal offense in some cases, as well as falling short on key requirements of investor protections.

The regulator warned investors to be extremely cautious about investing in schemes of this nature, and particularly following a number of complaints about investments in similar unregistered funds in the past.

The commission said it would be establishing a new Suspected Unauthorized CIS Alert List, which will document investment arrangements that have come to the regulator’s attention which may not be appropriately compliant.

Christina Choi, Executive Director of Investment Products at the SFC, said these types of unregistered investment products were by definition extremely risky.

“Unauthorized investment arrangements are highly risky and investors may lose all their investments. Investors are urged to check the new alert list and find out whether the arrangement is authorized by the SFC before investing.”

The regulator said it would continue to work with the Investor and Financial Education Council in raising awareness about the risks of CIS and other unauthorized investment products, to safeguard investors from losing out further. 

It comes amid fresh warnings from the SFC on specific tokens and ICOs, including the LABS Security Token, a real estate fractional investment token that was added to the Suspected Unauthorized CIS Alert List on its launch.

It comes against a backdrop of clear licensing requirements for those operating in Hong Kong, with the regulator regarded as having one of the most developed schemes of regulation in the world for licensed virtual asset service providers.

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