Blog de Gate

Noticias cripto, titulares e información

Gate.io Blog Hong Kong Establishes Joint Task Force to Monitor Cryptocurrency Exchanges and Investigate JPEX Scandal

Hong Kong Establishes Joint Task Force to Monitor Cryptocurrency Exchanges and Investigate JPEX Scandal

18 October 16:26

[//]:content-type-MARKDOWN-DONOT-DELETE
![](https://gimg2.gateimg.com/image/article/1690791857hotspot.jpeg)
## [TL; DR]
Hong Kong has created a working group to enhance its capacity to deal with threats that may exist in the cryptocurrency sector.

The Cyber Security and Technology Crime Bureau, Cyber Security and Technology Crime Bureau, the SFC’s Enforcement Division and Intermediaries Division as well as the police’s Commercial Crime Bureau have created a taskforce to coordinate their efforts to fight suspicious crypto activities.

The JPEX scandal has exposed weaknesses that still exist in Hong Kong’s cryptocurrency law.

## Introduction 
The recent development in Hong Kong shows that for a country to flourish as a crypto hub it should have a clear regulatory framework that supports blockchain firms and protects the investors. It should enforce the crypto regulations in a strong and effective manner.

The JPEX crypto exchange scandal indicates lack of strong regulatory oversight on the part of the Hong Kong authorities.

This article will discuss Hong Kong’s joint task force and how it will prevent similar scandals like the one involving JPEX crypto exchange. We will also look at how the JPEX scandal evolved.

## The Overview of Cryptocurrency Regulation in Hong Kong 
Although China has banned cryptocurrency activities in mainland [Hong Kong allows crypto investments](https://www.gate.io/blog_detail/1745/%E9%A6%99%E6%B8%AF-%E9%A6%99%E6%B8%AF "Hong Kong allows crypto investments") as long as the participants adhere to its regulations, established during mid-2023.

There are several crypto regulation provisions which should be followed. For example, only investors who are able to invest at least 8 million HKD (about $1 million) can invest in crypto assets.

Centralized cryptocurrencies that operate in the city should register with the Securities and Futures Commission (SFC) of Hong Kong. The city treats crypto exchanges in a similar way as automated trading platforms and securities brokers. Therefore, these platforms, including crypto exchanges, which are popularly referred to as Virtual asset (VA) platforms should follow the provisions of the 2023 Securities and Futures Ordinance.

Cryptocurrency exchanges which are the key players in crypto in Hong Kong sector should adhere to several regulatory guidelines which include securely storing the customers’ digital assets, adhering to Know Your Customer (KYC) standards and strictly following the city’s Anti-Money Laundering (AML) and Counter-Terrorist Financing provisions.

The city authorities closely monitor the activities of the virtual assets platforms to protect investors from manipulative practices and illegal activities. Therefore, each crypto exchange should develop a written policy and establish tools to prevent and report illegal trading activities.

In addition, every virtual asset platform should publish monthly commercial reports and submit annual financial audit reports to the SFC as stipulated in the Hong Kong Securities and Futures Ordinance (SFO). Further to this, each crypto exchange should have auditors who are well-conversed with digital activities who periodically review its operations.

Read also: [Hong Kong Sees A Stronger Future For Web3 ](https://www.gate.io/blog_detail/2306/gateio-market-watch-hong-kong-sees-a-stronger-future-for-web3 "Hong Kong Sees A Stronger Future For Web3 ")
## Collaboration between Hong Kong Police and the Securities and Futures Commission (SFC)
The Hong Kong Police and the SFC have launched a Task Force to monitor the operations of crypto exchanges in the city. This working group consists of members from the Cyber Security and Technology Crime Bureau, Cyber Security and Technology Crime Bureau, the SFC’s Enforcement Division and Intermediaries Division as well as the police’s Commercial Crime Bureau.

The key focus of this task force is to coordinate their efforts in a bid to share information related to suspicious activities pertaining to cryptocurrency trading activities. By doing this they will be able to identify and assess risks in a coordinated manner.

To this effect, Eve Chung, an assistant commissioner of police said, “The implementation of the new platform between the police and the SFC is instrumental to fast-tracking of vital intelligence exchange and joint collaboration in responses to the challenges arising from VATPs, so as to better protect the general public of Hong Kong.”

In other words, the working group will cooperate not just to share critical information regarding the operations of cryptocurrency exchanges but to investigate illegal activities that may take place in the sector. In all, it focuses on protecting consumers and crypto businesses.

This development comes in the wake of other key initiatives to protect of investors. As an example, in September the Hong Kong’s Securities and Futures Commission unveiled a program aimed at educating potential crypto investors through sharing vital information regarding Virtual Asset Trading Platforms Operators (VATPs).

Read also: [Hong Kong Triggers the Crypto Wave in the East, Will the Next Crypto Bull Run Start in China?](https://www.gate.io/blog_detail/2191/hong-kong-triggers-the-crypto-wave-in-the-east-will-the-next-crypto-bull-run-start-in-china "Hong Kong Triggers the Crypto Wave in the East, Will the Next Crypto Bull Run Start in China?")

Also, the Hong Kong’s Securities and Futures Commission (SFC) is working on increasing transparency in the crypto sector. For instance, it will publish a list of licensed VATPs and all application-pending virtual asset trading platforms.

These organizations have created the working group following the JPEX scandal that has led to the loss of customer digital assets through fraudulent means. 
## The JPEX Scandal 
The Japan Exchange, popularly called the JPEX which is  based in Dubai, has allegedly defrauded thousands of users of millions of dollars through several means. This crypto exchange, which claims to have partnerships with established financial institutions like Alibaba and Standard Chartered, lured many individuals and institutions to invest in it owing to high returns and low fees.

Also, the exchange used various marketing strategies to entice people to invest in it. As an instance, it used many online ads, billboards and influencer campaigns to persuade people to invest in its products. Joseph Lam, best known as Hong Kong’s “Trolling King” and Chan Yee, a Youtuber with more than 200,000 subscribers, promoted JPEX.

These influencers used unverified data to show their followers how they could make much money to buy houses and vehicles by investing in JPEX. As per the recent report more than 2,305 have lost over HK$1.43 billion (about $182.9 million) they invested in the crypto exchange, making it one of the biggest fraud cases in Hong Kong.

The implosion of JPEX started when the Hong Kong’s Securities and Futures Commission (SFC) issued a warning that JPEX was not a registered trading platform. Later, the exchange openly acknowledged that it was facing liquidity challenges which forced it to freeze withdrawals.

In addition, the crypto exchange has been running a controversial dividends plan where it is working on converting the customers’ assets into shares which will entitle them to earn dividends. However, the customers will only be able to withdraw the funds after two years.

Accordingly, this is JPEX’s plan to improve its cash <a href="/price/flow-flow" target="_blank" class="blog_inner_link">Flow</a> and retain its key investors. JPEX claims that it conducted a referendum where 68% of its customers voted in favour of the dividends plan and the formation of a decentralized autonomous organization (DAO).

Sadly, it did not respond to the correspondence of many customers who requested to know why they could not withdraw their funds. The crypto exchange also hiked its transaction fees to as high as 999 USDT for withdrawing 1,000 USDT.

After many JPEX investors complained to the relevant authorities, the Hong Kong Police started conducting its investigation leading to the arrest of more than 11 people who include, Siu-lung, CEO of over-the-counter (OTC) virtual asset money changer, Li, an ex-director, Lam and Chan on charges of money laundering, suspicion of fraud and conspiracy to defraud.

As part of the investigations, the police confiscated many electronic gadgets and other valuables including computers, smart phones, bank cards and other related documents. The Hong Kong authority has also frozen JPEX’s bank accounts and seized various assets which include luxury vehicles and other properties. 
## JPEX Response
The JPEX Exchange has made several clarifications. First, it has claimed that its recent liquidity challenge was a result of the action of one of its market makers that has frozen its funds. As a result, it is working with the responsible partner to release the funds.

It said, “We promise to recover liquidity from third-party market makers as soon as possible and gradually adjust the withdrawal fees back to normal levels.”

However, the JPEX scandal is likely to retard Hong Kong’s efforts to become a crypto hub. Carlton Lai, the head of Daiwa Capital Markets, a blockchain and cryptocurrency research firm stated, "I think this scandal will have a pretty sizable negative impact on retail sentiment, given its significant local presence and the various celebrities involved."

## Challenges Hong Kong’s Authorities are Facing 
The Hong Kong authorities are facing various challenges when overseeing crypto activities which include lack of cooperation from blockchain firms. It also has problems in coordinating with local and international stakeholders. The creation of the Hong Kong task force is the first step towards enhancing its capacity.

Read also: [Asia's Victory: US Crypto Crackdown Benefits Asia](https://www.gate.io/blog_detail/2856 "Asia's Victory: US Crypto Crackdown Benefits Asia")
## Conclusion 
Hong Kong has formed a multiparty task force to coordinate activities of the cryptocurrency sector. The Cyber Security and Technology Crime Bureau, Cyber Security and Technology Crime Bureau, the SFC’s Enforcement Division and Intermediaries Division as well as the police’s Commercial Crime Bureau have formed a working group that will identify suspicious activities in the cryptocurrency sector.

## FAQs about Cryptocurrency in Hong Kong
### Is cryptocurrency allowed in Hong Kong?
Cryptocurrency [is legal in Hong Kong](https://www.gate.io/blog_detail/2206/gateio-market-watch-hong-kongs-new-crypto-policy-triggers-market-rise "is legal in Hong Kong"), meaning that people are allowed to buy, hold and sell it. However, the crypto exchanges and other platforms that deal with cryptocurrencies should register with the relevant authorities. 
### Does Hong Kong invest in crypto?
Many people in Hong Kong invest in different cryptocurrencies that include <a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and ETH. Also, there are many firms that offer cryptocurrency services in the city. 
### What crypto can Hong Kong buy?
People in Hong Kong can buy various cryptocurrencies that include bitcoin, ETH, <a href="/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a> and many others. However, the city has clear regulations pertaining to the crypto assets which the exchanges can offer to the public. 
### Is Gate.io available in HK?
Gate.io, the centralized exchange, offers various services to citizens of Hong Kong. People can trade many cryptocurrencies like bitcoin, ETH, USDT, Binance Coin and XRP among others. 
### Which crypto platform is best in Hong Kong? 
There are many good platforms that deal with cryptocurrencies in Hong Kong. For example, the top exchanges like Gate.io, Binance, Bybit and OXK offer various crypto services in the city.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

BTC/USDT -1.62%

ETH/USDT -0.56%

GT/USDT + 0.23%

TL；DR

Introduction

The Overview of Cryptocurrency Regulation in Hong Kong

Collaboration between Hong Kong Police and the Securities and Futures Commission _SFC_

The JPEX Scandal

JPEX Response

Challenges Hong Kong’s Authorities are Facing

Conclusion

FAQs about Cryptocurrency in Hong Kong