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Hong Kong Clamps Down on Crypto Websites as Regulatory Gaps Surface

2 mins
Updated by Geraint Price
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In Brief

  • The Hong Kong securities regulator has blocked access to two crypto websites that made false claims to lure unsuspecting investors.
  • The first site, HongKongDAO, lied it had applied for a license, while BitCuped listed unaffiliated persons as its CEO and chairman.
  • The timeline of crypto enforcement actions revealed how regulations may need revisions to address previously unseen considerations.
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The Hong Kong Securities and Futures Commission (SFC) has blocked two crypto websites it suspects of scamming investors. HongKongDAO and BitCuped were placed on an alert list, SFC Director of Enforcement Damon Cheng Tak-ka confirmed on Wednesday.

The SFC discovered that HongKongDAO falsely claimed to have applied for operating licenses with the Commission and the region’s government. The SFC sanctions come after investors lost millions through fraudulent activity at the JPEX exchange earlier this year. 

Hong Kong Crypto Enforcements Increase

According to the Commission, HongKongDAO marketed its HKD token on two social media chat groups as having a high market value. After a user clicked “buy,” HongKongDAO sent them to another site for payment.

Social Media Leads Scam Methods
Social Media Leads Scam Methods | Source: SCMagazine

Read more: 15 Most Common Crypto Scams To Look Out For

The other platform, BitCuped, falsely listed the chairman and CEO of Hong Kong Exchange and Clearing as its own. It was blacklisted on Nov. 10. 

The SFC did not break out numbers concerning the victims and funds lost amid an ongoing investigation. A separate case in November saw residents lose approximately $20 million through investment in an unlicensed exchange, Hounax.

Read more: How To Identify a Scam Crypto Project

Crypto laws passed in June specify strict rules under which crypto exchanges may secure operating licenses. These include only listing permissible assets and keeping customer funds safe. Newer regulations will address stablecoins and potentially the tokenization of real-world assets.

Crypto Regulations Face Stiff Tests

The ongoing investigation into JPEX, a crypto exchange that lost victims close to $200 million, has highlighted the problems crypto regimes may initially face. The SFC was criticized for failing to single out the name of JPEX in its initial warnings. The SFC asserts that crypto laws did not give it the authority to intervene in the Hounax case earlier.

JPEX used flashy marketing campaigns and celebrities to attract investors, some of whom became victims of fraud. This case suggests that Hong Kong’s rules around crypto marketing could need more work. The UK Financial Conduct Authority’s promotion rules offer a possible case study, though some have deemed them untenable.

The Cryptocurrency Scandal Gripping Hong Kong. Source: YouTube

Europe’s Markets in Crypto-Assets bill addresses exchange requirements and rules for listing tokens. According to one European Union official, it lacks audit rules to evaluate an exchange’s global financial health. It also does not address decentralized finance despite regional interest, and is mostly silent on non-fungible tokens (NFTs).

Do you have something to say about how the enforcement actions against HongKongDAO and BitCuped expose some gaps in crypto regulations in Hong Kong, or anything else? Please write to us or join the discussion on our Telegram channel. You can also catch us on TikTokFacebook, or X (Twitter).

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...