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Hong Kong markets watchdog warns of cryptocurrency platform risks

December 16, 2022 Blockchain

Hong Kong’s financial markets watchdog has issued a warning over the risks of online platforms for cryptocurrency and other digital asset deposits.

“Investors are urged to be wary of the potential high risks” associated with so-called “virtual asset arrangements,” the Securities and Futures Commission (SFC) said in a statement.

The announcement comes at a tumultuous time for the cryptocurrency market.

This week the founder of failed crypto exchange FTX was arrested and charged.

“Whilst some VA [virtual asset] Arrangements are commonly labelled or marketed as ‘deposits’ or ‘savings’ products, they are not regulated and are not the same as bank deposits. Investors are not afforded with any form of protection,” the SFC said.

“If they cannot fully understand them and bear the potential significant or total losses, they should not make an investment,” it added.

It came after Sam Bankman-Fried, founder of the failed cryptocurrency exchange FTX, was arrested in The Bahamas on Monday.

Within hours US authorities charged him with “one of the biggest financial frauds in US history”.

The former FTX chief executive built a “house of cards on a foundation of deception,” Security and Exchange Commission (SEC) Chair Gary Gensler said.

Later on Tuesday Mr Bankman-Fried was denied bail by a judge in the Bahamas.

Bahamas Chief Magistrate JoyAnn Ferguson-Pratt denied the petition for his release on bail, citing a “great” risk of flight, and ordered that he be kept on remand at a correctional facility until 8 February.



Meanwhile, rival exchange Binance has seen withdrawals of more than $1bn in the last 24 hours after it said it would “temporarily paused” withdrawals of the USDC stablecoin.

According to blockchain data firm Nansen, users of the world’s biggest cryptocurrency exchange had withdrawn $1.9bn from the platform.

However, Binance’s chief executive Changpeng Zhao, who is widely known as CZ, put the figure at around $1.14bn.

“Some days we have net withdrawals; some days we have net deposits. Business as usual for us,” he added in a tweet.

Cryptocurrencies are not currencies in the traditional sense, but are stored online and act more like investment vehicles or securities – often with a high degree of volatility.

Their anonymity means they have been favoured for criminal activities such as drug dealing and ransomware attacks, but their supporters say there is huge potential for innovation – and independence from governments.

The world’s biggest cryptocurrency Bitcoin has lost more than 60% of its value this year, while other digital assets have also fallen sharply.

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