JKo Pay's "TrustPal" still needs clarification, FSC: Does not align with application documents, should be based on the principle of good faith!

Yesterday (21st), following the launch of the "Trust Treasure" product by Jkopay, the Financial Supervisory Commission (FSC) responded in the evening of the 21st, stating: "Jkopay did not mention 'Trust Treasure' in the submitted documents, and it is inappropriate for the operator to launch it hastily." According to the Apple Daily, the communication content between Jkopay CEO Hu Yijia and the media, as stated by the FSC, was also refuted by the FSC.

FSC's Response to TrustBao

On the evening of the 21st, the Financial Supervisory Commission's (FSC) Securities and Futures Bureau released a press release as follows:

Recent media reports mentioned that Jkop TrustBao is offered by three companies: Jkop Electronic Payment, Jkop Investment Trust, and Jkop FinTech. The FSC had previously approved Jkop Investment Trust to allow new investors to subscribe and redeem funds through electronic payment accounts. However, the company provided operational processes and investor interfaces for electronic payment structures, not related to the current TrustBao as described in the application materials submitted to the FSC.

The FSC stated that the legality of Jkop TrustBao's overall structure is yet to be clarified. The sudden launch by the operator is not permissible, and the public is urged to pay attention to the legality of financial products and related risks to safeguard their rights. The FSC emphasized that financial institutions should communicate with the commission regarding their business in good faith and should engage in related activities only under regulatory compliance.

Different Interpretations by Jkop Payment and Securities and Futures Bureau

According to the Apple Daily, officials from the Securities and Futures Bureau stated that Jkop Payment CEO Hu Yijia and Jkop FinTech Chairman Gao Wuzhong had discussed investment trust business with the FSC in early June, and they mentioned that they would report the finalized product name later. However, there was no subsequent report on the final product name.

The day after TrustBao was launched, Hu Yijia went to the FSC for clarification, and officials did not confirm any violation. However, they also mentioned that TrustBao's legality would not be confirmed until further clarification.

According to the report, TrustBao has attracted up to NT$150 million in funds. Due to the FSC's need to clarify compliance, the funds have been returned to Jkop Payment accounts by the custodian bank, delaying investments in Jkop Investment Trust.

What Does the FSC Need to Clarify?

(1) How to Regulate Indirect Guaranteed Returns

According to a report by CNA, officials from the Securities and Futures Bureau stated earlier this month that TrustBao is not part of the financial system. However, Jkop Investment Trust and Jkop Payment fall under the FSC's jurisdiction. Therefore, the investment trust contracts and partnerships established by Jkop Investment Trust must comply with regulations, and both direct and indirect guaranteed returns are not compliant.

Currently, TrustBao claims an "expected" return of 1.2% to 2.5%. According to regulations, investment firms (such as Jkop Investment Trust) are not allowed to guarantee returns directly or indirectly. However, if it is promoted by a non-investment firm (such as Jkop FinTech), how can it be regulated? This is still to be clarified by the FSC.

(2) Evading Regulation through Lending Structure

TrustBao has set up a way for users to withdraw funds at any time. When users redeem their investments, the funds are not credited immediately but depend on the investment targets of the fund, resulting in a gap of at least three days. In order to achieve immediate credit, "Jkop FinTech" will first lend money to users as redemption funds until the actual redemption funds from the fund are credited, and then this account will be used for users to repay "Jkop FinTech".

As "Jkop FinTech" is not a financial institution, establishing a lending relationship with "Jkop Payment" users to avoid the definitions of investment trusts and funds raises concerns of evading FSC oversight.

(3) Misalignment with Securities and Futures Bureau's Expectations

Officials from the Securities and Futures Bureau stated that when Jkop Investment Trust modified its fund trust agreement in April, the intention was only to allow "Jkop Payment" to handle fund applications and redemptions.

For the public to invest in "Jkop Investment Trust" funds, they still need to open an account with Jkop Investment Trust, and the money goes directly from the user's account to the custodian bank for investment.

Therefore, the FSC must first clarify the structural relationship between TrustBao and Jkop Investment Trust.

Cryptocurrency Profit Products Remain Unaffected

Bitcoin and other cryptocurrencies are not defined as legal tender, so investment products related to cryptocurrencies, such as fixed-term deposits and similar fund products, currently do not face regulatory issues like those of Jkop Payment. However, the corresponding risk is that due to the low level of regulation, users have relatively less protection in case of investment disputes. It is recommended that cryptocurrency investors proceed with caution due to the risks involved.

Reference:
(Apple Daily 1)
(Apple Daily 2)
(Apple Daily 3)