HK IEFC Report: Less Than Half of Retail Crypto Investors Know The Regulations

A recent survey conducted by Hong Kong's Investor and Financial Education Council (IFEC) sheds light on the limited awareness among retail crypto investors regarding the Virtual Asset Trading Platform Regulatory Regime. Enacted in June, this legislation aimed to safeguard the interests of retail investors participating in digital assets within the region. The survey, conducted with 1,000 respondents aged 18 to 69, reveals that only 47% of retail crypto investors are familiar with these new regulatory measures.

Intriguingly, the study shows a significant surge in crypto adoption among Hong Kong adults aged 18–29, with nearly 25% having invested in cryptocurrencies within the past year. This is three times the demographic average and a substantial increase compared to 2019 when only 3% of respondents in this age group reported involvement in the crypto market.

Despite this surge, the traditional investment landscape remains dominant in Hong Kong, with 96% of respondents expressing a preference for stocks as their primary investment. Mutual funds and trusts also held a notable position at 24%, followed by bonds at 18%. This suggests that, while crypto is gaining traction, it has not yet surpassed more conventional investment options in popularity.

The survey delves into the mindset of investors, revealing that the primary goals for investing in cryptocurrencies are “short-term profits” and the “fear of missing out.” Such motivations highlight the speculative nature of crypto investments in the region, indicating that many investors may not fully comprehend the associated risks or the regulatory framework introduced in June.

Dora Li, the general manager of IFEC, emphasises the importance of understanding product characteristics and related risks before investing. She asserts that this knowledge is crucial for aligning investment choices with financial goals and risk tolerance levels. Eric Chui, the head of the department of applied social sciences at PolyU, echoes this sentiment, suggesting that virtual asset investors should approach their investments more deliberately and rationally. He emphasises the need for investors to enhance their financial literacy and gather high-quality market information to avoid irrational investment behaviour and biases.

The regulatory landscape in Hong Kong underwent a significant change in June when retail crypto trading was legalised for licensed exchanges. However, the survey results suggest that awareness of these changes is not widespread among retail investors. This lack of awareness is concerning, especially considering the recent unravelling of the $166-million JPEX crypto exchange Ponzi scheme, the largest in Hong Kong's history, during the same period.

The survey findings underscore the need for increased education and awareness initiatives to bridge the gap between regulatory measures and the burgeoning interest in crypto investments. As Hong Kong continues to develop its digital asset framework, ensuring that citizens are well-informed about associated protections becomes paramount. The survey serves as a valuable tool for authorities to identify and address gaps, ultimately fostering responsible adoption and mitigating potential risks such as excessive speculation and scams.