Hong Kong warns virtual asset rate products may constitute a crime, Kikitrade will temporarily suspend the supply of savings products to Hong Kong users.

The Securities and Futures Commission (SFC) of Hong Kong recently announced that services involving virtual assets that offer returns, including terms like deposit, savings, earnings, or pledging, are still prevalent. The SFC warns investors that the majority of such platforms are unregulated, pose significant risks, and could result in the loss of all value. The SFC also stated that these products may constitute securities crimes. The Hong Kong virtual asset platform Kikitrade has immediately responded to this announcement by suspending the supply of related products to Hong Kong users.

Hong Kong Securities and Futures Commission warns investors: Virtual asset yield products may not be worth the risk

The announcement states that virtual asset products claiming high yields or guaranteed profits often involve using users' assets to lend to other platforms, or earning returns through decentralized lending protocols, or investing activities. When fraud or closures occur on virtual asset platforms, investors may suffer significant or total losses.

The SFC emphasizes that the vast majority of virtual asset platforms offering these arrangements are unregulated.

Legal risks of yield products: Unapproved collective investment schemes, advertising is also a crime

The SFC believes that under the Securities and Futures Ordinance, such products may constitute "collective investment schemes," which are illegal without SFC approval, leaving investors unprotected.

In addition, advertising or invitations for unapproved collective investment schemes are considered criminal offenses; under Section 103 of the Securities and Futures Ordinance, the maximum penalty is a fine of HK$500,000 and imprisonment for up to 3 years.

Hong Kong virtual asset platform Kikitrade responds to regulation, suspends related products

Hong Kong platform Kikitrade, backed by Taiwan accelerator AppWorks, immediately responded to the regulatory announcement by halting fixed-term and current deposit products for Hong Kong users by the end of this month.

Co-founder and CEO Sean Tao stated: "Kikitrade prioritizes the security of user assets. After careful consideration and communication with the SFC, we have decided to stop offering these products to Hong Kong users."

Case in point: Taiwan's Steaker and Hong Kong's AAX

FTX's impact on Taiwan's yield product platform Steaker led to significant user losses, and in Hong Kong, AAX exchange suffered sudden and malicious closure.

While the Hong Kong Securities and Futures Commission has taken action, the Taiwan Financial Supervisory Commission is still "considering" its response.