In Hong Kong and elsewhere, digital currencies, cryptocurrencies (including stablecoins) and virtual assets are gaining in popularity and are rapidly becoming a mainstream asset class, with retail investors increasingly buying into them.
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Here in the city, new and groundbreaking legislation has been introduced to implement a regulatory framework which specifically addresses virtual assets, cementing Hong Kong’s status as an innovative global financial hub.
The incursion of cryptocurrencies and virtual assets into the territory of everyday investment has created additional dangers for the unwary. Without proper regulation, virtual asset products can magnify the dangers of investing, which is why cryptocurrencies have long been associated with speculative bubbles, misleading advertising and fraud.
After the collapse of the cryptocurrency exchange FTX, the price of bitcoin (the largest cryptocurrency by market capitalisation) fell to as low as about US$16,000 in late 2022. However, its price has since rebounded to reach an all-time high of about US$126,000 only a few months ago.
Whilst this highlights the volatility of the cryptocurrency market, it is also a clear indicator that cryptocurrencies are here to stay. It is precisely this volatility inherent in the value of virtual assets that provides the investing public with the potential for great returns and the risk of great losses. The apparent risks presented by this asset class mean that effective regulation of this market has never been more important.
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In response, Hong Kong has created more nuanced and tailor-made criminal offences designed to protect the investing public.