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Response Paper to the Monetary Companies and the Treasury Bureau’s Public Session on Regulation of Crowdfunding Actions
Julius Yam
February 2023
Government Abstract: The adoption of recent applied sciences like crowdfunding in commerce and for social and political functions has created new alternatives in addition to dangers. Crowdfunding fosters innovation, however will also be used for illegal or illegitimate functions.
This paper responds to the Monetary Companies and the Treasury Bureau’s (“FSTB”) public session on regulation of crowdfunding actions, and considers whether or not it’s essential to introduce a brand new regulatory regime for crowdfunding. It argues that current legal guidelines are able to addressing most ⎯ if not all ⎯ of the dangers that crowdfunding actions pose. Even when the federal government decides that regulatory intervention is important, this paper means that its method ought to be guided by rules of regulatory certainty, minimizing person inconvenience and administrative feasibility. This allows the advantages crowdfunding gives to be maintained.
The paper identifies points raised by the FSTB’s proposal for regulating crowdfunding (“the proposal”) that should be addressed. It makes six broad suggestions that are summarized as
follows:
1. Figuring out the particular dangers posed by non-investment-based crowdfunding in Hong Kong and growing options that mitigate these dangers [paras 14-16].
2. Narrowing the scope of the proposal, together with, for instance, by [paras 24-26]:
a. Overlaying solely fundraisers which have Hong Kong financial institution accounts or are firms or different entities registered in Hong Kong.
b. Focusing on campaigns which are anticipated to lift over a specific amount.
c. Broadly deciphering the exceptions proposed.
3. Clarifying the definition, the scope of accountability and penalties of on-line crowdfunding platforms beneath the proposal [paras 31-33].
4. Streamlining the approval system’s procedures [para 44], for instance, by:
a. Simplifying utility processes.
b. Making help from regulators available.
c. Creating affordable time frames for the applying course of.
5. Offering sector-specific businesses with regulatory powers as an alternative of organising a centralized approval system [paras 45-46].
6. Setting apart the difficulty of crowdfunding for litigation functions [para 50].
We hope that this paper supplies a constructive platform for all stakeholders concerned to formulate an method that finest meets the pursuits of Hong Kong as a global monetary heart.
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