Response to the Public Consultation on the Regulation of Crowdfunding Activities
Release Date: 2023-03-15
To: Financial Services and the Treasury Bureau
Regarding the Public Consultation on the Regulation of Crowdfunding Activities
Regarding the Bureau's "Public Consultation on the Regulation of Crowdfunding Activities" (hereinafter referred to as the "Consultation Document"), which proposes the establishment of a "Crowdfunding Office" to regulate certain crowdfunding activities that are not currently covered by existing laws, our organization expresses support for this initiative to strengthen public and national security. However, we hope that the Bureau can avoid inadvertently hindering the normal development of various aspects, such as the economy and technology, while implementing and regulating.
Particularly in the field of innovative technology, as the industry is unprecedented, the government may not be able to grasp and be familiar with the situation of the relevant innovative industries in a timely manner, and may conduct prolonged research on the relevant innovative industries due to concerns. Our organization suggests that the authorities should consider the factor of timeliness in the implementation, as time is one of the important factors determining the rise and fall of innovative technologies, and overly long approval times and procedures may directly affect the success or failure of innovative technology projects.
As stated in paragraph 1.9 of the Consultation Document, the purpose of establishing the "Crowdfunding Office" is to combat money laundering, fraud, theft, acts and activities that endanger national security, or any behavior that incites, assists, abets, or provides financial or other material support to others to commit crimes that endanger national security, and our organization expresses support for this. However, our organization hopes that the Bureau can reduce unnecessary procedures, shorten the approval time for various applications as much as possible, and clearly define the project review process to accelerate the review progress of relevant projects. In addition, to avoid a repeat of the 2014 incident where a suspected crowdfunding fraud case involving a smart coffee machine occurred, government officials should avoid high-profile participation in such projects to prevent the public from mistakenly believing that the project has government support, which may lead to losses due to lack of proper risk consideration.
The financial industry has always followed the relevant laws and regulations in Hong Kong to combat money laundering and terrorist financing. Currently, the relevant laws and industry guidelines have not conducted specific risk assessments on "crowdfunding". Therefore, our organization suggests that after the establishment of the "Crowdfunding Office", it can collaborate with various financial regulatory agencies to establish specific guidelines or best practice recommendations for due diligence and risk assessment of "crowdfunding", so that the industry can have a clear reference, avoiding the financial institutions' reluctance to provide financial services and support for eligible crowdfunding projects due to unclear implementation methods, which may be detrimental to the long-term development of Hong Kong's financial sector.