Hong Kong securities regulator to name suspicious crypto players

Hong Kong's security regulator said on Monday that it will begin publishing a list of virtual asset trading platforms applying for an operating license, as part of the fallout from the attack on crypto platform JDEX.

The Securities and Futures Commission (SFC) announced it would also publish a list of licensed virtual asset players, those with licenses being shut down, and those the SFC finds "suspicious."

The regulatory body also promised it would explore a dedicated channel in which the public could report breaches and dodgy behavior by crypto players.

The SFC cited recently disgraced crypto exchange JPEX as a reason for this measure.

The Securities Commission said it would work with the police to investigate JPEX and "bring the wrong-doers to justice."

Hong Kong is determined to become a global crypto hub, and to do so has made it clear that players must meet government licensing requirements that commenced in June 2023.

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Despite this requirement, JPEX actively promoted its products and services throughout Hong Kong without even bothering to apply for a license, according to the SFC.

The crypto outfit ventured into scofflaw territory when its online ads appeared across Hong Kong long past the June licensing deadline. Its brand ambassadors were reportedly encouraging people to get in as investors "before full regulation and licensing" began.

At least eleven individuals connected to JPEX were eventually arrested – including some acting as social media influencers – as thousands of fraud complaints rolled in and $128 million of assets proved hard to nail down. The sum of missing assets has since reportedly reached $192 million.

The SFC said its licensing regime ensures virtual asset traders are "subject to robust governance measures covering safe custody of assets, prevention of market manipulative and abusive activities, and avoidance of conflicts of interest, among others, to safeguard investors' interests."

The regulatory body revealed on Monday that as a condition to allow licensed VATPs to serve retail investors, it has further enhanced requirements – "including ensuring suitability in the onboarding process, enhanced token due diligence, admission criteria and disclosures."

Despite the reluctance of players to abide by licensing requirements, Hong Kong appears poised to press ahead with its crypto dreams.

On Monday, the SFC said it "recognizes VA trading as integral to the Web3 ecosystem, and is one of the first major financial regulators to introduce a comprehensive framework to regulate a wide range of VA-related activities since 2017."

As for the associated risks, the org declared they "are consistent with the latest international consensus among financial regulators." ®