Hong Kong Regulator Warns Against Cryptocurrency Exchange JPEX

The Hong Kong Securities and Futures Commission (SFC) has issued a warning against the cryptocurrency exchange JPEX, accusing it of exhibiting "suspicious features" and disseminating misleading information regarding its licensing.

The SFC stated that online influencers and over-the-counter virtual asset money changers had been making false or deceptive claims about JPEX having applied for a virtual asset trading platform (VATP) license in Hong Kong. The SFC clarified that no entity in the JPEX group is licensed or has applied for such a license with the SFC.

The regulator cautioned investors to be vigilant about investment opportunities that appear too good to be true and highlighted that investment advice on social media platforms is often provided by paid promoters rather than investment professionals. The SFC has contacted relevant influencers, opinion leaders, and OTC shops, requesting that they stop promoting JPEX and its related services and products.

JPEX's website claimed to be "licensed and recognized" for facilitating the trading of virtual assets with overseas regulators, another assertion refuted by the SFC. This warning from the SFC is part of its efforts to regulate unlicensed cryptocurrency activities in the city.

The SFC introduced its VATP regulatory regime in June as part of Hong Kong's bid to become a crypto hub. This regime mandates that exchanges serving retail customers apply for and obtain approval within a one-year grace period. Under this licensing regime, only cryptocurrencies with significant market capitalizations like Bitcoin and Ethereum are allowed for retail trading. However, JPEX's website indicates that it offers various other virtual assets, including derivatives and staking products.

The SFC's statement expressed concerns about JPEX, including promises of exceptionally high returns, reports of difficulties faced by investors in withdrawing assets, and false claims of partnership and investment from a Hong Kong-listed company. The SFC warned local investors about the risks associated with unregulated VATPs, emphasizing the potential loss of funds in case of platform closure, bankruptcy, hacking, or asset misappropriation.

This caution from the SFC follows recent concerns raised by Legislative Council member Duncan Chiu about criminals exploiting Hong Kong's support for crypto for illegal activities. Chiu urged regulators and law enforcement agencies to prevent such activities and called on the SFC to disclose operators that had no intention of applying for licenses or were unlicensed, allowing the public to avoid problematic platforms.

Under Hong Kong's Anti-Money Laundering and Counter-Terrorist Financing Ordinance, virtual asset fraud can result in fines of up to HK$10 million (US$1.3 million) and imprisonment for up to 10 years. The SFC affirmed its commitment to taking enforcement action against individuals and entities violating the VATP regime it administers. Currently, HashKey and OSL are the only licensed exchanges listed by the SFC.

By fLEXI tEAM