Hong Kong’s Securities and Futures Commission (SFC) has warned unlicensed virtual asset trading platforms (VATPs) against engaging in improper practices or they may face legal and regulatory consequences.

The regulator found that some unlicensed VATPs claim to have submitted license applications when in fact they have not done so. These untrue and misleading claims give the public a false sense of assurance that the VATP is in compliance with the SFC’s regulatory requirements.

The SFC has noticed that some unlicensed VATPs have set up new entities in Hong Kong to offer virtual asset services. These new entities may not be in compliance with the new rules for VATPs in Hong Kong.

The commission has also discovered that some unlicensed VATPs are continuing to offer new services and products under their existing entities that are not compliant with the new rules.

SFC said that these non-compliant activities may raise concerns about the VATPs’ intention to comply with the law and their fitness and properness to be licensed.

The SFC will take into account whether past non-compliant activities could have reasonably been avoided when considering license applications from VATPs.

The regulator will also consider whether VATPs can demonstrate a genuine intention to rectify non-compliant activities, including gradually unwinding impermissible transactions in an orderly manner.

The SFC reminds unlicensed VATPs that any entities they have established in Hong Kong to offer virtual asset services are also subject to the new rules. These entities will need to apply for SFC licenses or they will need to close their business in Hong Kong.

The statement read,

“Most VATPs currently accessible by the public are unregulated. As and when the SFC approves a VATP to provide services to retail investors, the list of virtual asset trading platforms published on the SFC’s website will be updated.”