In response to the scandal involving the JPEX cryptocurrency trading platform, Hong Kong is looking to tighten regulations around cryptocurrencies.
JPEX Scandal
On Monday, six people were arrested on allegations of fraud linked to JPEX. The arrests were made after authorities said they received more than 1,400 complaints against JPEX involving HK$1 billion ($128 million) in losses.
Specifically, some investors complained of being unable to pull out funds from their JPEX accounts or find their balances “reduced and altered.” JPEX has been labeled a rugpull by users of the platform.
Last week, Hong Kong’s Securities and Futures Commission (SFC) warned investors of JPEX being an unlicensed platform. SFC stated that the crypto trading platform actively promoted its products to the Hong Kong public through social media influencers, key opinion leaders (KOLs), and over-the-counter exchange shops. The securities regulator also noted that it found a series of suspicious features about the practices of JPEX and its promoters.
As of the time of writing, JPEX has shut down trading activities on its platform. On Sunday, JPEX said it was negotiating with third-party market makers to resolve a “liquidity shortage” after the ongoing probe by Hong Kong authorities forced its partnered third-party market makers to freeze funds.
Hong Kong Regulators to Tighten Crypto Regulations
JPEX’s scandal has now shifted regulators’ attention to the crypto sector in Hong Kong. Following this case, regulators are planning to implement stricter regulations on platforms offering crypto services as part of an effort to protect investors.
Citing a statement from Hong Kong’s chief executive, John Lee, The Seattle Times reported that the government will be stepping up efforts to educate investors and remind them only to use SFC-licensed platforms.
While specific details of the new regulations remain scarce at the moment, they are expected to include stricter licensing requirements for cryptocurrency exchanges and stricter rules on how exchanges can operate.
It is worth mentioning that Hong Kong regulators previously relaxed rules on crypto trading, allowing retail investors to participate in such activities.
