SFC Starts Investigation Of Crypto-Exchanges
Hong Kong’s Securities & Futures Commission (SFC) has stated that it will be investigating local cryptocurrency exchanges that are suspected to be operating without a proper license or violating securities laws. According to the SFC, several crypto-investors filed complaints regarding services provided by various exchanges. Most of the complaints were about not being able to withdraw funds from accounts, which had been registered on the crypto-exchanges. Other issues reported included suffering financial losses because of “technical breakdowns” of the trading platforms. There were also a number of investors expressing concerns regarding fraudulent and unlicensed ICOs, misappropriation of their assets, or even unlawful attempts at manipulating the market.
Ashley Adler, CEO of Hong Kong’s SFC, stated, “We will continue to police the market and enforce when necessary…we are also urging market professionals to do proper gatekeeping to prevent frauds or dubious fundraising and to assist us in ensuring compliance with the law”. This recent crackdown from Hong Kong regulators has come at a time when other regulators in countries such as France and Germany have also begun to scrutinize digital currencies. Notably, most of the world’s global policymakers have voiced their support for blockchain technology, which is the foundation for most crypto-platforms. However, they’ve warned crypto-investors that they run the risk of losing their entire investment in digital currencies if the volatile crypto-market crashes completely.
SFC Has Sent Notices to Crypto-Exchanges
The SFC has already initiated their investigation process by sending letters to seven cryptocurrency exchanges that have connections to Hong Kong. The letters warn the exchanges that they must refrain from trading cryptocurrencies until they obtain a proper license. Per the SFC, cryptos are securities, as defined by the Securities & Futures Ordinance(SFO), and the same rules that apply to traditional securities also apply to digital currencies.
Hong Kong’s regulators are not alone in trying to enforce securities laws on crypto-related businesses. Notably, U.S. regulators also consider certain types of crypto-related initiatives to be securities offerings. Jay Clayton, chairman of the U.S. Securities & Exchange Commission, recently stated that ICOs are basically securities. Therefore, companies launching ICOs must follow U.S. securities laws, according to American regulators.
Hardly anyone could have predicted that the cryptocurrency market would grow as fast as it has, particularly in 2017. Although the market has come down considerably since peaking in December 2017, many people are still confident that it’s definitely here to stay. For instance, Jensen Huang, CEO of Nvidia, a large American company that manufactures high-end graphics processing units (GPUs), recently remarked, “Crypto is a real thing — it’s not going to go away”. His comments came at a time when his company reported better than expected fiscal 4th quarter earnings for 2017.
Even though Nvidia’s profits from its crypto-related business were still relatively small compared to overall profits, it’s quite possible that the company’s crypto-segment could continue to grow in the foreseeable future. It’s also unlikely that Mr. Huang could have predicted that his company would profit as much as it has from the cryptosphere. Although there are many people like Mr. Huang, who are optimistic about the future of cryptocurrencies, there are also quite a few people who aren’t.
Given the large number of varied and mixed opinions about almost every aspect of the cryptocurrencies, we can safely assume that nobody can accurately predict what the future holds for the crypto-market. However, if lawmakers and regulators sincerely adopt a “do no harm approach” like U.S. regulators have suggested, then we could see the digital currency market grow in a healthy and sustainable way. Moreover, how lawmakers and regulatory bodies respond to future developments in the cryptosphere could be critical in determining its long-term success.