Ambiguity regarding cryptocurrency regulations in Hong Kong continues to be an Achilles heel for investors in the new asset class, as they cannot officially seek the help of the state’s financial regulator for redressal, reports South China Morning Post, November 26, 2018.
Unclear Regulations to Blame for the Catch-22 Situation
While the autonomous state has publically endorsed blockchain technology and fintech at large, its stance towards cryptocurrencies has been somewhat debatable. Although it has not taken extreme measures to ban crypto trading or exchanges in the country like its neighbor China it, however, hasn’t made the situation any more favorable in the country.
In October 2018, Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC) proposed a “sandbox” approach for crypto exchanges in the Asian financial hub.
During the announcement, one key point highlighted by the SFC went unnoticed by many, which stated that the new approach would not accept platform operators trading digital assets that are futures derivatives or contracts.
Although this approach is yet to be implemented, it is clear that once in place, it will not govern exchanges which deal in cryptocurrency futures contracts and derivatives. Rather, the proposal by the SFC leaves crypto futures and derivatives completely unregulated; a “buyers beware market.”
This entails that investors will have no legal right to seek the SFC’s help in case of any fraud, or manipulation by the exchanges.
The ambiguity also sits in line with the recent OKEx fiasco, where the cryptocurrency exchange prematurely closed Bitcoin Cash (BCH) contracts, inflicting losses more than $400 million to the investors. Notably, under Hong Kong’s law, the decision was not illegal; thus, bolstering the argument of being alert while putting money in an unregulated industry.
Further, a Hong Kong-based trading firm Amber AI accused the exchange of manipulating the global crypto market by forcibly liquidating BCH futures. The technology firm even called out OKEx for contradicting themselves and putting the investor’s financial safety in jeopardy.
OKEx in News for all the Wrong Reasons
Although OKEx enjoys the distinction of being the second largest cryptocurrency exchange, it has had its share of being in the limelight for undesired reasons.
BTCManager reported on September 12, 2018, how the founder of the exchange, Star Xu, was taken into custody by Shanghai police officials after allegedly being involved in a fraudulent scheme regarding the WFEE Coin.