A new move by Hong Kong’s securities watchdog to disclose pending licence applications by virtual trading platforms would better inform investors amid the JPEX fallout, Chief Executive John Lee Ka-chiu on Tuesday said.
The city leader’s latest remarks on the largest local fraud case of its kind were centred on a U-turn by the Securities and Futures Commission (SFC) to identify cryptocurrency firms seeking to set up trading services under a regulatory mechanism launched in June.
Alleged losses in virtual assets in the JPEX saga have totalled HK$1.49 billion (US$190.6 million), with the SFC coming under fire for what critics said was a slow response to sound the alarm despite complaints against the platform.
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Four other companies have applied for licences, namely HKVAX, HKBitEx, Hong Kong BGE Limited and Victory Fintech Company Limited, according to the SFC.
Lee on Tuesday pointed out that one of the government’s positions on virtual assets trading was to ensure information disseminated would be transparent and as clear as possible.
“This clear information will assist investors to make decisions as to what they should do when they consider making an investment,” Lee told reporters before the weekly meeting of key decision-making body the Executive Council.
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“But I must repeat, their interests will be best protected if they invest on platforms which have been licensed. That means these platforms will be properly regulated, there will be proper risk control and proper standards that they must fulfil,” he warned.
Lee also called on “people who are engaged in the business” to work alongside the government on educating investors on cryptocurrency products and risk assessment.
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Centralised cryptocurrency exchanges offering services to Hong Kong investors are given a year from June 1 to ensure compliance with the new regulatory regime or wind down their operations in the city.
The SFC resisted disclosing pending applications only a week ago, arguing there could be a false sense of security since not all applicants would qualify for licences.
Critics said the grace period, coupled with the “information vacuum” on applicants, had enabled JPEX’s dubious operations.
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Cash-for-crypto shops and social media influencers associated with JPEX have falsely claimed the platform was seeking a licence even though it has not filed an application, according to an SFC statement issued on September 13.
The platform has since slapped an exorbitant fee on customers seeking to withdraw their assets and remained defiant despite a string of police operations targeting its local changer shops and influencers.
Police have so far arrested 11 people involved in promoting the platform, froze HK$15 million in bank accounts and seized three properties valued at HK$44 million.
Several exchanges have claimed that they are in the process of securing a Hong Kong licence but are not part of SFC’s four-firm list, including OKX, which told media earlier this month it was in the “final stage” of its “preparation” for application submission.
Only two platforms, HashKey and OSL, have secured a licence for retail crypto trading services in Hong Kong.
Additional reporting by Willa Wu
More from South China Morning Post:
- Hong Kong’s SFC to publish names of cryptocurrency platform applicants, walking back on reluctance in face of ‘public demand’
- Hong Kong JPEX scandal: investors lured by flashy promotions, hard sell, gushing celebrities and talk of easy money
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