Are “cryptocurrencies” legal tender, like banknotes and coins?

“Cryptocurrencies” (a type of virtual assets) are emerging investment products. Some people may confuse them with legal tender like banknotes and coins as cryptocurrencies are often mentioned on social media and in the press, and they have the word “currency” or “coins” in the names. However, cryptocurrencies are not legal tender in most part of the world; and in Hong Kong, they are not a generally accepted form of payment.

It is important to note that cryptocurrencies, such as Bitcoin and Ethereum are virtual assets cryptographically secured using distributed ledger technology, such as blockchain, to represent value in digital form. Virtual assets can be traded through online trading platforms. To strengthen investor protection, the Securities and Futures Commission (SFC) implemented a regulatory regime of virtual asset trading platforms on 1 June 2023 that all centralised virtual asset trading platforms carrying on their business in Hong Kong or actively marketing their services to Hong Kong investors need to be licensed and regulated by the SFC. (Check the List of SFC-Licensed Virtual Asset Trading Platforms)

While the regulatory regime helps provide more investor protection measures and reduce some trading risks, many virtual assets are highly volatile and speculative, and come with different types of risks. Unlike traditional assets, virtual assets generally do not have intrinsic value, nor are they backed by any government or bank. Their prices mainly rely on investor confidence and market demand and supply which are sensitive to market news (Understand the risk of virtual assets).

Virtual assets are high risk products which evolves rapidly with many new products and services. Investors should do their own research to carefully understand the features and risks of virtual assets, and keep abreast of the market developments. Make sure you have verified whether the trading platforms are licensed by the SFC before trading, and never blindly trust the investment tips shared online. If you are interested in virtual assets, watch the below video with tips to help you make wise investment decisions!