Hong Kong securities regulator recently said that it is coupling its enforcement action against initial coin offerings (ICOs) with investor education.

While acknowledging blockchain potential in a recent speech, Julia Leung, deputy head of the Hong Kong Securities and Futures Commission (SFC) said that it does not entitle anyone to conduct fundraising from the public in violation of securities law.

In September 2017, the SFC issued a guidance on how digital tokens, issued via ICOs, may fall under the definition of securities.

“In Hong Kong, if the digital tokens involved in an ICO fall under the definition of “securities”, dealing in or advising on such digital tokens, or managing or marketing a fund investing in them, may constitute a regulated activity. We cautioned that parties engaging in a regulated activity targeting the Hong Kong public are required to be licensed by or registered with the SFC, irrespective of where they are located,” Leung said.

She further pointed to a number of factors which make ICOs risky investment. This includes highly technical content and opacity, high volatility, hacking attempts, and lack of appropriate regulatory oversight among others.

“Further complicating matters, many of these fundraisings are dubious, if not downright frauds. The issuers escape the scrutiny of the police or securities regulators because of their crossborder nature and the way the crypto assets are structured to fall outside any regulator’s perimeter,” she added.

Earlier this year, the SFC took regulatory action against a number of ICO issuers and crypto asset platform operators. This includes the action taken against Black Cell Technology Ltd, which halted its ICO to the Hong Kong public and agreed to unwind transactions for Hong Kong investors.

Leung concluded saying, “We are coupling our enforcement action with investor education. We collaborate closely with the Investor Education Centre to issue educational materials and participate in public education campaigns about the risks associated with ICOs and crypto assets.”