James Lau, Secretary for Financial Services and the Treasury Bureau (FSTB) in a letter to the President said that misleading cryptocurrency activity is subject to a HK$500,000 fine or five years prison time.

The following actions by virtual currency traders are prohibited under the Trade Descriptions Ordinance (TDO) that passed in 2012—false trade descriptions, misleading omissions, aggressive commercial practices, bait advertising, bait-and-switch and wrongly accepting payments.

The statement was made regarding the sale of mining machines or other products related to virtual assets, due to the variety of fraudulent activities happening in the Hong Kong market right now.

Enforcement of the TDO falls under Customs and Excise Department.

“In recent years, crimes relating to virtual assets have been on the rise, mainly involving deception and blackmail,” said the secretary.

 

“If contravention of the TDO is found, appropriate actions will be taken immediately to protect consumer interests.”

James elaborates that in 2018, the police received reports of 324 cases of virtual assets-related crimes, while in 2016 and 2017, there were 67 and 50 cases of Bitcoin-related cases reported, respectively.

Gains from Crypto-Trading are Subject to Tax in Hong Kong

James also mentioned that profits and gains from virtual asset-related activity will be considered on a case-to-case basis, but the rules of the Inland Revenue Ordinance (IRO) apply even to transactions involving virtual assets (except for profits from the sale of capital assets).

Cases are chosen for audits and investigations based on the risks posed.

Hong Kong Regulators still Mulling Crypto-Regulation

With virtual asset trading evolving and developing rapidly, the FSTB and the Securities and Futures Commission (SFC) are still considering whether regulating virtual asset trading platforms is appropriate. For now, Hong Kong is monitoring international regulatory development as they mull the situation locally.

Last November, SFC announced a regulatory sandbox to explore whether it was suitable to license and regulate virtual asset platforms under its existing power—and will decide on whether additional regulations should be put into place once the exploratory stage has concluded.

For now, the SFC is in discussion with virtual asset trading platform operators to understand their operations so that they can determine if virtual asset trading platforms should be regulated under the Securiteis and Futures Ordinance.

Featured image via Brand Hong Kong