Hong Kong securities watchdog warns of high risks associated with virtual assets after cryptocurrency exchange FTX collapse
- Investors who do not fully understand virtual assets and are unable to bear high losses should not invest in such products, SFC says
- The warning comes after FTX, once the world’s second-largest cryptocurrency exchange, filed for bankruptcy last month
Investors placing bets on virtual assets should be aware of risks associated with such investment products as they are mostly unregulated, Hong Kong’s securities watchdog warned.
“Investors are urged to be wary of the potential high risks associated with virtual asset arrangements,” the Securities and Futures Commission (SFC) said in a statement late on Tuesday. “If they cannot fully understand them and bear the potential significant or total losses, they should not make an investment.”
The SFC said it has noticed that virtual, or cryptocurrency, assets have remained popular among investors, despite previous risk warnings by its subsidiary, the Investor and Financial Education Council, which is dedicated to improving financial literacy in Hong Kong.
Cryptocurrencies are digital currencies in which transactions are verified and records are maintained by a decentralised system, rather than a centralised authority.
Awareness of the risk of potential losses in the event of fraud and collapse of virtual asset platforms is especially important, given the recent fallout from troubles encountered by a number of platforms, it noted.