Beware of the risks of unlicensed and overseas virtual asset trading platforms

Virtual assets/Crypto assets


Virtual assets are high risk products, but have also gained much attention in recent years. One of the most common ways to invest in these emerging assets is to conduct transactions via virtual asset trading platforms.

Starting from 1st June 2023, all centralised virtual asset trading platforms carrying on their business in Hong Kong or actively marketing their services to Hong Kong investors need to be licensed and regulated by the SFC. Investors can refer to the SFC’s "List of licensed virtual asset trading platforms" which sets out the names of virtual asset trading platform operators which are formally licensed by the SFC, and click on the relevant link for further information on the platform operator. Nevertheless, most virtual asset trading platforms currently accessible by the public are not regulated by the SFC. Investors should beware of the risks of unlicensed and overseas virtual asset trading platforms.

Risks of unregulated virtual asset trading platforms
(in Chinese only)

Unprotected when trading on unregulated platforms

There are potential high risks associated with unregulated virtual asset trading platforms which may lack transparency and well-established operations. Investors may not be protected at all. For example, many platforms may have disclaimers to discharge responsibility even if they lose investors’ virtual assets. If disputes arise between investors and the platforms, there may not be any channels to handle complaints and the SFC may not be able to offer any help. Should these platforms wind up or cease operations, or if there are incidences of fraud, breaches or theft, investors may suffer a complete loss of virtual assets held in these platforms.

Risks of overseas platforms

Some platforms may be licensed or registered with overseas regulators. But it is important to know that some jurisdictions only adopt a light touch approach to regulating these platforms such that they are not subject to any investor protection measures. Also, due to the cross-border nature, making complaints or seeking assistance overseas may be difficult when disputes arise. If the trading platforms close or cease operations, investors may be fighting an uphill battle in submitting claims and seeking legal remedies. If these trading platforms have no connection with Hong Kong, the Hong Kong Police and regulators may not be able to help. Investors should also stay vigilant that fraudulent platforms may claim to have an overseas licence to earn your trust.

Besides, some platforms claim that they have submitted licence application to the SFC. You should understand that any applicants who are not yet licensed by the SFC may not be compliant with the SFC’s requirements, and that their applications do not warrant approvals by the SFC. Therefore, if investors would like to trade virtual assets, they should refer to the SFC List of Licensed Virtual Asset Trading Platforms to see if the platform is licensed by the SFC.

Last update: 17 Oct 2023