The deputy head of the Hong Kong Securities and Futures Commission (SFC), Julia Leung, issued a warning to both investors and members of the public about initial coin offerings (ICOs), calling many of these projects “downright frauds.”
In her speech at an investment forum in Hong Kong on Friday, Leung reiterated the SFC’s critical position on ICOs as a fundraising tool, saying that although blockchain has “the potential to improve efficiency and financial inclusion,” this does not mean that any project can raise funds from the public “in violation of securities law.”
Leung claimed that many ICOs “escape the scrutiny of the police or securities regulators because of their cross-border nature and the way that crypto assets are structured to fall outside any regulator's perimeter."
Similarly to the US Securities and Exchange Commission (SEC), Hong Kong’s SFC has played an active role in policing the ICO space. In March, the SFC halted the ICO of marketplace startup Black Cell Technology Limited for allegedly not being in compliance with local regulations.
According to the SFC, the Black Cell ICO qualified as a Collective Investment Scheme (CIS), but had not properly registered as such. The SFC has also ordered several exchanges to delist tokens from other ICO projects also deemed to be securities.