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Hong Kong to Reveal List of Crypto License Applicants in the Wake of JPEX Scandal

Hong Kong’s regulatory authority announced on Monday its intention to release a list of cryptocurrency trading entities that have submitted applications for operating licenses within the region, following the JPEX scandal that rocked the territory.

Julia Leung Fung-yee, the CEO of the Securities and Futures Commission (SFC), during a media briefing, stated that the list will be made public in response to heightened public interest, according to local media sources. However, she emphasized, “Being an applicant does not imply full compliance with SFC regulations.”

JPEX, a crypto exchange based in Hong Kong that operated without a license, is accused of scamming its clients. This alleged scheme resulted in an estimated loss of HK$1.43 billion (equivalent to US$182 million) impacting over 1,600 investors. This episode is considered to be the most significant fraud incident in the history of Hong Kong. The fallout from the JPEX case has seemingly hampered the government’s continuous efforts to establish Hong Kong as a leading player in the global cryptocurrency arena.

The oversight body also highlighted that as of August 2023, merely two digital asset trading platforms have successfully obtained licenses from the SFC to operate. These licensed entities are OSL Digital Securities Limited and Hash Blockchain Limited. Both of these platforms have been granted the green light to cater to the retail clientele in Hong Kong, following the introduction of updated cryptocurrency regulations on June 1.

The regulator further mentioned, “Four additional firms have submitted applications for licenses.” The companies in question include HKVAX, HKBitEx, Hong Kong BGE Limited, and Victory Securities.

The SFC made a public announcement on September 13, pinpointing that JPEX was conducting business in the territory without the requisite license. Subsequent to this revelation, JPEX halted its trading operations and levied heavy charges on customers attempting to withdraw their assets. Reports as of September 23 indicate that the count of affected individuals has escalated to 2,305.

SFC Stresses on Investor Education

On Monday, the regulatory authority issued a statement emphasizing that virtual asset trading platforms (VATPs) with SFC licenses are bound by rigorous governance protocols. These include ensuring the secure custody of assets and taking measures to deter market manipulation, all in a bid to protect investors’ interests.

The statement further read, “To enable SFC-licensed VATPs to cater to retail investors within the framework of the new regulations, the SFC has introduced additional strict requirements. These encompass measures like rigorous suitability checks during the customer onboarding process, enhanced due diligence for tokens, specific criteria for token admission, and transparent disclosures.”

In an effort to safeguard the public from potentially harmful crypto entities, the regulatory body announced its plans to release a list of “suspicious VATPs.” This list will comprise of platforms that might have contravened regulatory laws, and the regulator will not hesitate to forward relevant cases to law enforcement when deemed necessary.

Additionally, in a collaborative initiative with the Investor and Financial Education Council (IFEC), the SFC aims to initiate a widespread public awareness campaign. This endeavor seeks to enlighten the public about potential crypto-related scams and fraudulent activities.

In their statement, the authority elaborated on the campaign’s objectives: “Through diverse channels such as mass media, social media, and educational talks, we aim to elevate investor education, enabling the public to better comprehend the inherent risks tied to virtual assets and the possibility of fraud.”

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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