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Hong Kong Regulator in ByBit Crackdown–Investors Risk Losing Everything

Last Updated March 15, 2024 10:25 AM
Teuta Franjkovic
Last Updated March 15, 2024 10:25 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Hong Kong SFC has flagged Bybit for offering unlicensed investment products in the region.
  • Bybit maintains that their offerings comply with regional laws and clarifies they don’t target Hong Kong specifically.
  • However, they are simultaneously seeking a license from the SFC to operate legally.
  • The SFC has identified 11 of Bybit’s products as concerning.

Hong Kong’s markets regulator recently included Bybit  in its list of dubious cryptocurrency exchanges and flagged several of the crypto exchange’s products as suspicious investment offerings .

The Securities and Futures Commission (SFC) also issued a public warning, highlighting that Bybit operates without a license.

Hong Kong Watchdog Flags Bybit Offerings as Unlicensed

The SFC has updated its alert list to include Bybit , specifically identifying 11 of the platform’s investment offerings as questionable. The range of products under scrutiny includes futures contracts and wealth management services, all of which, according to the SFC, operate without a license in Hong Kong.

The Securities and Futures Commission (SFC) highlighted several Bybit products as concerning, including :

  • Bybit Futures Contracts and Inverse Futures Contracts
  • Bybit Options
  • Bybit Leveraged Tokens
  • Dual Asset
  • Dual Asset 2.0
  • Bybit Shark Fin
  • Liquidity Mining
  • ETH 2.0 Liquid Staking
  • Bybit Web3 Staking
  • Bybit Lending
  • Bybit Wealth Management.

Due to stringent regulatory requirements, Bybit is neither authorized to operate in the US nor in the UK. Nevertheless, people can still access the platform using a VPN to circumvent geographical restrictions. Despite this, Bybit has issued statements in the media asserting its commitment to collaborating with regulatory authorities worldwide. The exchange emphasizes its dedication to adhering to industry best practices, aiming to ensure full compliance with regulatory standards.

Bybit did not immediately respond to a request for comment.

Regulator Warns Investors About Unlicensed Bybit Exchange

The Securities and Futures Commission (SFC)’s apprehensions are rooted in the availability of Bybit’s offerings to investors in the region, underscoring that entities within the Bybit group  lack an SFC license for conducting regulated activities in Hong Kong. Despite these concerns, Bybit asserts its products comply with regional laws and clarifies that it does not market its services within the Hong Kong market.

According to the statement :

“The SFC is concerned that these products have also been offered to Hong Kong investors and wishes to make it clear that no entity in the Bybit group is licensed by or registered with the SFC to conduct any ‘regulated activity’ in Hong Kong.”

The regulator has firmly stated  its position on enforcement, declaring that it “will not hesitate” to initiate action against “unlicensed activities where appropriate.” This assertion underlines the authority’s commitment to regulating the market and protecting investors by ensuring that all financial activities within its jurisdiction comply with legal requirements.

Bybit Seeks Hong Kong License Amidst Regulatory Scrutiny

This situation emerges while Bybit is actively seeking regulatory approval. Spark Fintech, an entity associated with Bybit in Hong Kong, submitted an application for a virtual asset trading platform license to the Securities and Futures Commission (SFC) in January. The application is currently under consideration, and its approval or rejection will play a crucial role in determining whether the firm can legally operate within the jurisdiction.

Bybit functions on a global scale via bybit.com, which is operated by a company based in Seychelles, distinct from the Hong Kong-specific platform bybit.com.hk, managed by Spark Fintech. This differentiation between the two entities becomes increasingly significant amidst growing scrutiny from the Securities and Futures Commission (SFC).

Recently, the exchange announced  its intention to support Optimism, Base, Arbitrum, and Mantle in anticipation of an upgrade. However, Bybit has only indicated that it will temporarily suspend withdrawals on these networks. Consequently, it remains uncertain whether this temporary pause in withdrawals is directly linked to the Dencun upgrade.

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