Regulatory Risk in Fintech Platforms: Investor Due Diligence and Compliance Strategies in the Age of BiyaPay

The recent warning issued by Hong Kong's Securities and Futures Commission (SFC) against the unlicensed trading platform BiyaPay underscores a critical issue for fintech investors: the growing necessity of regulatory alignment in digital finance. BiyaPay, which purported to offer Hong Kong and U.S. stock trading services without SFC approval, was added to the regulator's Alert List after being identified through social media monitoringHong Kong SFC Warns Against Unlicensed Platform BiyaPay^[1]. This case highlights the systemic risks posed by unlicensed platforms and the urgent need for investors to prioritize due diligence and compliance strategies in an increasingly fragmented market.

The BiyaPay Case: A Cautionary Tale for Fintech Investors

The SFC's warning against BiyaPay is emblematic of a broader trend. Unlicensed platforms often operate in legal gray areas, leveraging aggressive marketing and social media to attract retail investors while evading regulatory oversightHong Kong SFC Issues Warning Against BiyaPay - dapp.expert^[2]. In BiyaPay's case, the lack of a public response to the SFC's allegations has further eroded trust, raising concerns about its operational legitimacyThe Compliance Conundrum: Lessons from BiyaPay's Unlicensed Operations^[3]. According to the SFC, investors engaging with such platforms face heightened risks, including limited recourse in disputes, cybersecurity vulnerabilities, and the potential for total financial lossesStatement on regulatory framework for virtual asset portfolios managers, fund distributors and trading platform operators^[4].

This incident aligns with the SFC's broader efforts to combat unregulated virtual asset trading platforms (VATPs). As of September 2025, the regulator has intensified scrutiny of platforms that fail to comply with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), which mandates licensing for any entity offering trading services to Hong Kong investors“A-S-P-I-Re” for a brighter future: SFC’s regulatory roadmap for Hong Kong’s virtual asset market^[5]. The absence of compliance not only jeopardizes investor assets but also signals a disregard for market integrity—a red flag for discerning investors.

The SFC's A-S-P-I-Re Roadmap: A Framework for Regulatory Alignment

To address these challenges, the SFC has introduced the “A-S-P-I-Re” regulatory roadmap, a five-pillar strategy designed to harmonize fintech innovation with investor protectionAsia Financial Regulatory Update - June 2025^[6]. The framework emphasizes:
1. Access: Streamlining market entry for compliant platforms while restricting unlicensed operators.
2. Safeguards: Strengthening cybersecurity and asset custody protocols.
3. Products: Ensuring transparency in virtual asset offerings, including stablecoins and derivatives.
4. Infrastructure: Modernizing digital identity verification and cross-border onboarding processes.
5. Relationships: Fostering accountability between platforms and their usersDue-Diligence Checklist for FinTech Founders^[7].

For investors, this roadmap provides a blueprint for evaluating fintech platforms. For instance, the SFC's updated non-face-to-face onboarding guidelines—allowing digital identity verification for overseas clients—demonstrate how regulatory alignment can enhance scalability without compromising compliance. Startups that adopt such measures are better positioned to attract institutional capital, while those that ignore them risk reputational and financial fallout.

Investor Due Diligence: A Checklist for Risk Mitigation

The BiyaPay case underscores the need for rigorous due diligence. Investors should prioritize the following strategies:
1. Regulatory Verification: Cross-check platforms against the SFC's Public Register of Licensed Persons.
2. Cybersecurity Audits: Assess whether platforms use cold storage for assets and employ multi-factor authentication.
3. Operational Transparency: Scrutinize governance structures, including responses to regulatory inquiries and public disclosures.
4. ESG Integration: Evaluate environmental, social, and governance factors, such as data privacy practices and carbon footprint.

AI-powered tools can augment these efforts by automating risk detection and scalability analysis. However, technology alone is insufficient; investors must also demand clean legal documentation, including properly executed stock-option plans and intellectual property assignments.

Compliance as a Competitive Advantage

For fintech startups, regulatory compliance is no longer optional—it is a competitive imperative. The SFC has explicitly stated that past noncompliance will be scrutinized in future license applications, signaling a zero-tolerance approach. Startups that proactively align with the A-S-P-I-Re framework can differentiate themselves in a crowded market, while those that cut corners risk joining the ranks of platforms like BiyaPay.

Conclusion: Navigating the New Normal

The BiyaPay incident is a wake-up call for fintech investors. As the sector evolves, regulatory alignment will become a cornerstone of sustainable growth. By adopting the SFC's A-S-P-I-Re roadmap and prioritizing due diligence, investors can mitigate risks while supporting innovation. In an era where unlicensed platforms pose existential threats to market stability, the mantra is clear: compliance is not just a legal obligation—it is a strategic advantage.