Just at a time when China is considering a ban on crypto mining, Hong Kong now seeks to clamp down on mining rig sales in its region. Recently, Hong Kong’s Secretary of Financial Services and Treasury – James Lau – issued a statement saying that the regulators plan to bring crypto mining-related activities under the Trade Descriptions Ordinance (TDO).
It means that the regulators would have a regulatory control on the sale of crypto mining equipment and related products needed to mine virtual assets. The TDO states that anyone found violating the regulatory laws will have to pay a hefty fine of HK$500,000 or a jail-term for five years.
Lau mentions that all the commercial transactions pertaining to crypto mining “devices” shall be brought under the TDO. He stated that anyone selling crypto mining products that involve ‘aggressive commercial practices’, ‘false trade descriptions’, ‘misleading omissions’, ‘bait-and-switch’, ‘bait advertising’ is committing an offense.
Lau’s remarks come in response to the recently posed questions by Hong Kong’s Legislative Council member, Wu Chi-wai. The council member referred to incidents of luring investors in purchasing crypto mining equipment through fraudulent means.
A Potential Fraud in Hong Kong’s Crypto Mining Industry
Earlier this year in January 2019, the South China Morning Post published a similar incident wherein investors claim to have lost HK $3 million in a money tossing stunt involving the crypto mining machines.
A crypto businessman named Wong Ching-kit was accused of cheating several Hong Kong residents who invested in his crypto mining machines. The hardware machine sold by Ching-kit was supposed to mine the Filecoin digital currency.
The crypto businessman lured investors by promising investors good profits just within three months of their investments. However, Filecoin failed to make a listing on any of the exchanges and investors failed to sell the mining machines. Later, the investors were promised a refund, however, that plan never came to fruition.
The legislative council member Wu Chi-Wai from Hong Kong’s Democratic Party thus asked to review the current regulations for the cryptocurrency market and see whether there’s any need to beef up the measures.
Hong Kong’s Securities and Futures Commission (SFC) asserts that fact that it will “continue to review its existing measures and suitably consider whether or not to put in place a more effective regulatory approach”.
Bitmain Withdraws Its IPO Plans
Furthermore, it will closely follow recommendations and steps initiated by global regulatory bodies “to ensure that we can devise a suitable mechanism in good time to address the potential risks arising from virtual assets activities”.
Although Hong Kong has more relaxed crypto regulations compared to China, crypto companies still say that there’s some lack of inclusive atmosphere. Last month, the crypto mining giant – Bitmain Technologies Ltd. allowed its IPO application to lapse which it had filed back in September 2018 with the Hong Kong stock exchange.
In a statement, Bitmain said: “We do recognize that despite the huge potential of the cryptocurrency and blockchain industry, it remains a relatively young industry which is proving its value. We hope regulatory authorities, media and the general public can be more inclusive to this young industry.”
Besides the regulatory hurdles, Bitmain also failed to attract investors due to the constantly falling crypto market.
