Editorial | JPEX scandal another reminder for financial regulators to be alert
- As the number of cryptocurrency victims grows, Hong Kong authorities need to react faster to the latest get-rich schemes and close loopholes to protect investors
The number of victims of the JPEX cryptocurrency scandal is sure to grow beyond the police update of 1,641 complaints from clients involving HK$1.2 billion. The question now is whether the authorities should have been more proactive in protecting investors. The city does, after all, aim to be a virtual asset trading hub, prompting the market watchdog recently to update licensing guidelines for retail trading platforms. Investor protection is the paramount goal.
Unlicensed platforms are to be avoided. The JPEX affair is a reminder of that. The platform is nothing more than a HK$1 shell company, emerging from Sydney and expanding quickly in Asia.
JPEX was operating outside the purview of the regulators, with the watchdog, the Securities and Futures Commission (SFC), telling a press briefing it lacked the power to act because the platform was not under its regulatory jurisdiction.
Instead it proposed to step up investor education – not always an equal match for get-rich-quick lures. And police need complaints before they can act.
That said, the SFC did issue an alert 14 months ago in July 2022, stating that JPEX was unregulated, and urging investors to “be extremely careful”.
Coming just three months after the new virtual asset regulations came into force, this case is a reminder that financial regulators need to be on their toes to get ahead of the curve, especially since an open economy and the borderless internet render many of the rules for bricks-and-mortar firms obsolete.