Lily Z. King

Opinion | Why JPEX scandal won’t derail Hong Kong’s cryptocurrency ambitions

The silver lining is that Hong Kong has a licensing regime capable of addressing the regulatory challenge JPEX exposed, making it safer for retail investors

The debacle also spotlighted an industry maturing beyond mere speculation, with growing corporate and institutional interest promising a more stable digital economy

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Lily Z. King

Published: 5:30am, 5 Oct 2023Updated: 6:03am, 5 Oct 2023

Hong Kong’s ambition to become a global hub for digital assets has been unequivocal. The government’s diligent efforts to foster a conducive ecosystem for digital assets underpin its broader vision to remain financially competitive on the international stage. But the recent debacle of JPEX, a Hong Kong-based cryptocurrency exchange, has stirred the waters of Hong Kong’s rapidly growing cryptocurrency sector.

In mid-September, JPEX introduced sky-high withdrawal fees, effectively restricting users from accessing their funds, leaving thousands in a financial quandary. This incident, with a monetary fallout estimated to surpass HK$1 billion (US$127 million), has not only triggered a police investigation but also sharply tainted the public’s perception of cryptocurrency.

The JPEX scandal has undoubtedly cast a sombre shadow over Hong Kong’s cryptocurrency aspirations. This incident may incite a ripple of public scepticism towards any Web3 initiatives by the government.

I even heard an institutional investor saying: “Why does Hong Kong need Web3? We already have the horse racing industry for gamblers.”

The silver lining is that by addressing the regulatory challenge the JPEX scandal has exposed, Hong Kong could potentially enhance the safety net for retail investors. It also reaffirms the necessity of Hong Kong’s licensing regime for virtual asset trading platforms.

The current volatility, security risks and technological barriers in the cryptocurrency market make it difficult to anticipate a significant growth in retail investment any time soon. But we are seeing encouraging signs of the institutional adoption of digital assets and blockchain technology.

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