Lessons from JPEX: Hong Kong’s cryptocurrency retail investors must be better protected

Last year’s cryptocurrency winter had Hong Kong regulators rightly congratulating themselves. An abundance of initial caution and incremental approaches since 2017 to formulate a regulatory regime for cryptocurrency trading meant the city dodged a reputational bullet.

FTX was based here, got annoyed with our perceived tardiness, dabbled in regulatory arbitrage and fled to the Bahamas in 2021, where it subsequently imploded to unveil a monumental fraud.

Singapore’s reputation was smeared, after already suffering from the collapse of Three Arrows Capital and Do Kwon’s algorithm-based Terra and its native token, Luna. Temasek Holdings, the gold standard of astuteness, had to write off US275 million after putting Singapore’s sovereign wealth in FTX.

With Singapore’s cryptocurrency ambition on the ropes and Dubai’s intentions explicit, Hong Kong entered the fray. The government was lobbied to open up the licensed market to retail investors, to prevent unsophisticated traders from using unlicensed or overseas exchanges and being exploited. This was what happened with JPEX, the unlicensed cryptocurrency platform accused of scamming investors.