Hong Kong’s cryptocurrency executives are applauding the government’s approach to regulating the virtual asset sector and are pushing for greater public education, as the city continues to deal with the fallout of an alleged fraud involving cryptocurrency platform JPEX that has resulted in HK$1.5 billion in losses.
The Hong Kong government has “taken the correct approach in its commitment to the future growth of Web3” by developing “clear and consistent regulation to govern the digital assets economy”, 10 cryptocurrency industry executives, including Animoca Brands co-founder Yat Siu, said in a joint statement published on Thursday.
They have “taken notice of the situation at JPEX”, and wish to express their “unambiguous support” for the government’s “strict and swift” enforcement actions towards firms that violate the city’s regulations, the letter reads.
The group includes executives from cryptocurrency exchange OSL and financial services platform Matrix Port, as well as Gary Liu, former CEO of the South China Morning Post and its non-fungible token (NFT) spin-off Artifact Labs.
Hong Kong police display seized cash, computer equipment, luxury handbags and promotional leaflets at a press conference on September 19, 2023, regarding the initial arrests of people with ties to cryptocurrency platform JPEX. Photo: Agence France-Presse
Hong Kong cryptocurrency trading platform JPEX has in recent years attracted a large number of retail investors by putting up advertisements in the city’s busiest locations, claiming to be a licensed exchange that offers yields as high as 20 per cent.
The warning, followed by JPEX suspending trading and withdrawals, also set off one of the city’s most high-profile law enforcement actions in the cryptocurrency industry that has so far seen 27 arrests. While the real ringleaders remain unknown, police said last week that they were getting “relatively close to the core” people behind the operation.
The JPEX scandal, which comes as Hong Kong is trying to boost its status as a global cryptocurrency and fintech hub, has dealt a heavy blow to public trust in the industry, undermining a new licensing scheme meant to instil trust and help develop retail trading of virtual assets.
Days after the scandal, the Securities and Futures Commission (SFC), originally unwilling to disclose licensing progress, yielded to public requests to publish a list of cryptocurrency companies that have applied to become licensed virtual asset trading platforms. The SFC also promised to improve efforts to educate the public about virtual assets, which have been criticised for being insufficient so far.
Expressing support for further public education, the 10 executives said in their letter that the SFC should work with the cryptocurrency industry.
“We recommend that the government work with the Web3 industry to educate the public by providing realistic examples of blockchain scams and fraudulent schemes, similarly to the existing measures in place to educate the public about telephone frauds,” they wrote.
The Hong Kong Licensed Virtual Asset Association, a new organisation launched in May headed by Lawrence Chu, chairman of Venture Smart Financial Holdings, also said earlier this week that it aims to “contribute to the efforts to raise public awareness of the opportunities and risks brought by virtual assets”.
The association will help new enterprise entrants into the space and the public “stay up-to-date on the latest regulatory, technological and market developments”, it said.
