Editorial | JPEX case challenges Hong Kong’s regulatory skill
- The failure of the platform highlights the vigilance that is needed for the city’s healthy development as a virtual assets trading centre
The collapse of FTX in the United States cast a cloud over cryptocurrency exchanges. It is getting darker in Hong Kong with the failure of JPEX to honour withdrawals. What sets JPEX apart is that the unlicensed virtual assets platform continues to issue statements defying local authorities.
This adds to a regulatory challenge for Hong Kong, less than a year after the government announced a bold plan to make the city a virtual assets hub, and just three months after new virtual asset regulations came into force.
This has, rightly, brought a prompt expression of concern from Chief Executive John Lee Ka-chiu, who says the financial services sector has a role in explaining new products, and reminds investors to deal with properly licensed and regulated virtual asset platforms.
More detail of the HK$1.43 billion fraud leaves no doubt it is a scam. It underscores the difficulty of policing in a borderless world, especially where the internet and money are concerned in an open economy.
The SFC says it lacked the power to act decisively on JPEX because the platform operates outside its regulatory jurisdiction. But that still leaves the question of whether it did enough.
After all, Hong Kong’s Anti-Money Laundering Ordinance clearly states that it is an “offence to advertise unlicensed virtual assets service”. It is also an offence to “fraudulently induce others to invest in virtual assets”.