• Wed. Jul 17th, 2024

Hong Kong Strengthens Digital Asset Control

Maria Bartiromo

ByMaria Bartiromo

Sep 21, 2023

Following the arrest of eight people tied to an unregistered cryptocurrency exchange, Hong Kong’s top official stated on Tuesday that the province will step up its control of digital assets. These arrests follow claims of fraud involving over 1,600 investors and losses totaling more than $150 million in assets.

The detained persons include social media personalities who supported the JPEX bitcoin exchange as well as JPEX staff. Hong Kong’s Chief Executive, John Lee, underlined the need of investing in virtual assets through approved platforms. He stated that the Securities and Futures Commission is committed to constantly monitoring the situation and guaranteeing proper investor protection. Furthermore, the government intends to improve investor education in order to develop a better knowledge of the risks and legal frameworks involved with these platforms.

Senior Superintendent Kung Hing-fun of the police noted that most affected investors lacked experience and were enticed by promises of substantial returns and minimal risks. Elizabeth Wong, head of the Securities and Futures Commission’s fintech unit, disclosed that an investigation was underway to determine if JPEX had violated anti-money laundering regulations. The case had been referred to the police, and the Commission pledged its full cooperation.

Eight individuals connected to unregistered cryptocurrency exchange arrested

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The eight arrests followed a recent announcement by the Securities and Futures Commission, which revealed that JPEX operated without a license and lacked the authority to conduct cryptocurrency trading activities in the city. Investors had reported difficulties withdrawing their virtual assets from JPEX accounts and experiencing unauthorized alterations to their balances.

In response to these developments, JPEX suspended trading on its platform, citing negotiations with third-party market makers to address liquidity shortages. However, the exchange accused an unidentified third-party market maker of unfairly freezing funds.

Authorities have already frozen bank accounts totaling 15 million Hong Kong dollars ($1 million) and seized properties worth 44 million Hong Kong dollars ($5.6 million). A staggering 1,641 complaints have been lodged against JPEX, involving a total of $1.2 billion Hong Kong dollars ($153 million).

Hong Kong’s Chief Executive emphasizes investing through approved platforms

Mainland China has banned cryptocurrency transactions since 2021, including transactions conducted on foreign exchanges from within the country. Consequently, Chinese cryptocurrency firms have sought refuge in Hong Kong, leading to the need for more stringent regulatory measures.

On June 1, 2023, a significant milestone was reached in the realm of cryptocurrency trading in Hong Kong, as the Securities and Futures Commission (SFC) initiated the process of accepting applications from cryptocurrency exchanges. This marked a significant shift in the landscape of cryptocurrency regulation in Hong Kong, opening up new opportunities for licensed operators while prioritizing the need to ensure that retail investors are adequately informed about and understand the inherent risks associated with digital asset trading.

Before this regulatory development, cryptocurrency exchanges in Hong Kong were primarily accessible to professional investors, imposing limitations on the broader retail investor base. However, with the SFC’s decision to permit licensed cryptocurrency exchanges to serve retail investors, the market dynamics underwent a significant transformation.

As of now, only two cryptocurrency exchanges, OSL Exchange and Hashkey Exchange, have successfully navigated the rigorous regulatory process and received official approval from the SFC. These approved exchanges are now poised to operate legally, serving both professional and retail investors in the region.

Maria Bartiromo

Maria Bartiromo

Maria Bartiromo is a renowned news writer and journalist, celebrated for her insightful reporting and authoritative voice. With a career spanning years, she has established herself as a trusted source of accurate and comprehensive news analysis, keeping readers informed on vital global developments.

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