The Securities and Futures Commission (SFC) has issued a warning to the public regarding Bybit, an unlicensed virtual asset trading platform (VATP), which has been offering crypto-related products in various jurisdictions without the necessary authorization.
Range of Unlicensed Products Offered
Bybit’s offerings include a wide array of crypto-related products such as Futures Contracts, Inverse Futures Contracts, Options, Leveraged Tokens, and several innovative investment products like Dual Asset 2.0, Shark Fin, Liquidity Mining, ETH 2.0 Liquid Staking, Web3 Staking, Lending, and Wealth Management. The SFC’s concern extends to these products being marketed to investors in Hong Kong without the requisite licensing.
Regulatory Requirements in Hong Kong
In Hong Kong, the trading and marketing of crypto-related products are tightly regulated. Such products might be classified as “futures contracts” or “securities” under the Securities and Futures Ordinance (SFO). Conducting business in these products, especially targeting Hong Kong investors, constitutes a “regulated activity” that requires a license from the SFC, barring certain exemptions. Engaging in these activities without a license is considered a criminal offense, subject to legal prosecution and potential criminal sanctions.
Moreover, it is illegal to distribute advertisements, invitations, or documents concerning these products to the Hong Kong public without authorization from the SFC. Violating these provisions could lead to serious legal consequences.
In response to these unauthorized activities, the SFC has placed Bybit on its Suspicious Virtual Asset Trading Platforms Alert List and included Bybit’s crypto-related products on the Suspicious Investment Products Alert List as of 14 March 2024.
Warning to Investors
The SFC urges investors to exercise caution when dealing with unlicensed entities like Bybit. Investments made through such platforms carry significant risks, including the potential loss of the entire investment if the platform ceases operations, collapses or engages in asset misappropriation. Moreover, seeking legal recourse against entities without a Hong Kong nexus can be challenging, with limited legal remedies available.
The SFC has made it clear that it will not hesitate to take enforcement action against entities conducting unlicensed activities. This warning serves as a reminder of the importance of verifying the licensing status of any platform offering investment opportunities in the crypto space.
