Crypto-related activities, such as mining, have huge profit potential if done properly. However, there are also associated risks given how difficult it has been to regulate the industry and establish an appropriate legal framework that can determine what is right and what is illegal.

Hong Kong took a step forward towards a clearer outlook when it comes to finding common ground to crypto mining operations’ rules. The secretary of Hong Kong’s Financial Services and the Treasury recently said that they are regulated by the local trading legal instrument. A written reply to the sovereign state’s Legislative Council was revealed this week, on April 3rd.

Falling into TDO’s Reach

Upon the Council’s interest in knowing more about the possible risks and fraudulent activities in relation to digital assets and related performances, like mining, the response was that indeed, mining falls under the Trade Descriptions Ordinance, or TDO, which is a bill passed in 2012 that determines punishment for illicit trading acts in the Asian location.

The response was courtesy of the Secretary James Lau, who clarified that mining and the sale of related hardware or related products to digital assets will fall under the TDO’s legal reach. Among the mentioned illicit or unfair practices are misleading omissions, wrongly accepting payments, false trade descriptions, and others.

Penalties for those that incur in unfair crypto or mining-related practices or activities can be harsh, to say the least. Lau explained that infractors can be fined up to $500,000, or even worse, they could spend five years in jail, depending on several legal factors.

“Regarding the sale of mining machines or other products related to virtual assets, a trader who, in the course of business, engages in unfair trade practices prohibited under the Trade Descriptions Ordinance (TDO), including “false trade descriptions”, “misleading omissions”, “aggressive commercial practices”, “bait advertising”, “bait-and-switch”, and “wrongly accepting payment”, commits an offence. A maximum fine of $500,000 and imprisonment for five years may be imposed upon conviction,” he replied.

Prominent Cases

The Secretary spoke about one specific fraudulent case that rose to prominence in its time. Local police took three people into custody when they reportedly tricked 20 innocent investors into providing funds (more than HK$3.7 million, or approximately $471,400) to purchase crypto-related hardware, services, and equipment.

A similar sum (HK$3 million, a little under $400,000) was also mentioned as part of another criminal case that involved BTC investor Wong Ching-kit. He, along with his 20-year-old associate, were arrested in Hong Kong following a conspiracy to defraud 20 people, also by selling them crypto and mining-related equipment.

Ching-kit is a famous personality in Hong Kong, having appeared in a video in Epoch’s Facebook page asking people if they thought money could fall from the sky – at that moment, the equivalent of $764 on stacks of bank notes fell from the roof. An incident followed and he had his day in court, although he was released on bail.

By Andres Chavez


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