Hong Kong’s SFC to publish names of cryptocurrency platform applicants, walking back on reluctance in face of ‘public demand’

The Securities and Futures Commission (SFC) will publish the list due to public demand, said its CEO Julia Leung Fung-yee
Being an applicant does not mean the companies are fully compliant with the SFC’s regulations, she added

SFC

Xinmei ShenandNatalie Wong

Published: 11:47am, 25 Sep 2023

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Hong Kong’s securities regulator said it would publish a list of companies that had applied for licences to offer cryptocurrency trading services to retailers, walking back on its reluctance to do so in the face of public backlash over JPEX’s debacle.

The Securities and Futures Commission (SFC) will publish the list due to public demand, said the regulator’s chief executive officer Julia Leung Fung-yee, at a press conference today. Being an applicant does not mean the companies are fully compliant with the SFC’s regulations, she added.

03:03

The cryptocurrency scandal gripping Hong Kong

Only two cryptocurrency trading platforms – OSL Digital Securities Limited and Hash Blockchain Limited – had been licensed to serve Hong Kong’s retail customers since the SFC’s new virtual asset rules came into effect on June 1.

Four other companies had applied for licences, the SFC said: HKVAX, HKBitEx, Hong Kong BGE Limited and Victory Fintech Company Limited.

JPEX scandal sets back Hong Kong’s virtual asset hub ambitions, analysts say

Lawmakers welcomed the move, with Jeffery Lam Kin-fung describing the disclosure of applicants as an “an overdue spring” policy that could boost investors’ faith in the regulatory system.

The legislature’s panel on financial affairs decided to add an agenda item for October 9 to discuss the regulation of virtual asset trading platforms.

Lam, who chaired the panel, said the SFC’s president Tim Lui Tim-leung and CEO Julian Leung Fung-yee will attend the session.

Legislator Johnny Ng Kit-chong agreed, but said more could be done by the SFC to strengthen regulations, for example on the operation of the Over-the Counter (OTC) crypto stores in the city.

“We can say these physical stores face no oversight, on how they advertise and how they sell crypto,” he said.

“If we treat them as currency exchange platforms, should customs be responsible? What are the roles of the SFC and the Financial Services and Treasury Bureau? The government should tackle this issue as soon as possible.”

On September 13, the SFC identified JPEX to have offered its services to retail investors in Hong Kong, operating in the city without a licence. The platform suspended trading and slapped an exorbitant fee on customers seeking to withdraw their money. Thousands of users had complained, with the latest tally rising to 2,305 on Saturday, totalling about HK$1.43 billion (US$182 million) in assets, making it the largest alleged fraud of its kind in Hong Kong.

“The JPEX incident highlights the risks of dealing with unregulated [cryptocurrency trading platforms] and the need for proper regulation to maintain market confidence,” the SFC said in a statement.

“It also shows that dissemination of information to the investing public through the Alert List, warnings and investor education can be further enhanced to help members of the investing public better understand the potential risks entailed by suspicious websites” or the trading platforms, SFC said.

JPEX, registered as a shell company in Hong Kong, had never sought a licence in the city, SFC said. Asked whether it should offer more transparency on the licensing statuses of companies, the SFC said last week that it cannot publish its list of applicants because that would create a “false sense of security”, leading people to believe that all those firms were already fully compliant with the regulations.