Unlicensed VASPs must be avoided, says Hong Kong SFC

The Hong Kong Securities and Futures Commission (SFC) has warned that people should refrain from believing a cryptocurrency exchange at face value when it says it has submitted a virtual asset service provider (VASP) license.

“Most VATPs currently accessible by the public are unregulated,” the SFC declared.

Investors Must be Aware of the Risks of Unlicensed VASPs

The SFC published a statement on Aug. 8 to inform investors of the “improper practices” that crypto exchanges are engaging in. Specifically, falsely claiming to have applied for a VASP license.

Applications only began to be accepted from June 1. However, the SFC had been actively considering industry feedback since February as part of its public consultation process.

Julia Leung, CEO of the SFC, previously declared in a June 13 statement that the purpose of the license is for investor protection, and to ensure “orderly and fair markets” in the digital assets industry.

Leung stated that the collapse of Terra and FTX last year played a significant role in introducing a license regime for VASPs. The SFC has granted licenses to only two crypto exchanges so far – OSL and Hashkey – as disclosed on the website.

However, the SFC warned that there are several unlicensed VASPs “misleading the public.” These exchanges have been claiming to have submitted a license application when it is not the case.

Other VASPs are telling investors that they intend to apply for a license. However, the SFC cautions that this doesn’t guarantee they have actually submitted an application.

“Investors should be aware that these unlicensed VASPs may, or may not, submit a license application after all,” the statement wrote.

Investors could lose everything

The SFC suggests that investors are playing with fire without doing their own research before making an investment.

“Investors may face the possible risk of losing their entire investment held on the VATP if it ceases operation, collapses, is hacked or otherwise suffers from any misappropriation of assets.”