The IInvestors and Financial Education Council (IFEC), a public organization under the Securities and Futures Commission (SFC), has issued a warning about the potential risks associated with foreign and unlicensed virtual asset trading platforms. In reaction to the growing acceptance of virtual assets which, despite their appeal, present a high-risk investment opportunity, this advice has been offered.

The SFC has not yet authorized any platform that can provide services to retail investors after the new regulatory framework for virtual asset trading platforms takes effect on June 1, 2023. IFEC advises investors to be cautious about the inherent dangers, which emphasizes that most of these platforms that are now accessible to the public are not yet regulated by the SFC.

Investors may be exposed by trading on unregulated sites. Investors may not be protected from potential dangers by the lack of operational transparency and defined procedures of such platforms. Many platforms, according to IFEC, have disclaimers that release them from liability even if they misplace investors’ virtual assets.

IFEC also clarified potential issues caused by disagreements between investors and platforms. Investor complaints may have little choice in the absence of regulatory scrutiny. Also, CFS may not be able to help. The IFEC emphasized that cases of fraud, security breaches, theft or an abrupt interruption of operations could result in the complete loss of virtual assets held on these platforms.

Although they may be registered or licensed by foreign regulators, offshore platforms can carry dangers. Investor protection may be compromised by inadequate regulatory practices by some governments. Furthermore, due to its cross-border nature, seeking complaints or support abroad can be difficult. Investors may face an uphill battle to file claims and seek legal redress if such platforms close or cease operations, the IFEC has warned. Also, local authorities and law enforcement may not be able to help if these sites are unrelated to Hong Kong.

The Hong Kong Special Administrative Region (HKSAR) needs more financial education, something IFEC has long called for. Seeks to protect clients from the dangers of unregulated virtual asset trading platforms through this guide, helping them make more informed and confident investment decisions.