Hong Kong’s securities regulator and police force set up a task force to assist with the detection of suspicious activity at crypto exchanges, intensifying oversight of the industry after the blowup at the JPEX platform.
The working group comprised of the city’s Securities and Futures Commission and law enforcement officials will “enhance collaboration in monitoring and investigating illegal activities related to virtual-asset trading platforms,” the financial watchdog said in a statement late Wednesday.
The tie-up comes as Hong Kong grapples with the fallout from JPEX. Authorities allege the unlicensed crypto platform defrauded investors of HK$1.6 billion ($280.2 million) and have arrested at least 20 people as part of a probe.
The saga threatens to complicate Hong Kong’s push to develop a global home for the digital-asset industry in a bid to restore its image as a cutting-edge financial centre. The city’s reputation has been hurt by claims of decreased autonomy from China as well as memories of prolonged Covid-related curbs.
“This strengthens the reputation of Hong Kong as a safe and compliant jurisdiction to do business in virtual assets,” said Vince Turcotte, a consultant at Cognitive GRC, which advises firms applying for crypto licenses in the city. “The formation of the task force is a proactive step to shore up confidence in the new regime.”
Hong Kong rolled out a new regulatory framework for virtual assets mid-year and awarded the first mandatory licenses for trading platforms in August.
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Learning Lessons
Officials are seeking to learn the lessons of 2022’s crypto bear market and ensuing bankruptcies by ensuring investors are protected, while also creating clear paths for companies to get permits.
Jurisdictions like Dubai, Singapore and the European Union have also developed crypto frameworks, whereas the status of digital assets remains hazy in the US.
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The new task force in Hong Kong includes representatives from the commercial crime, cybersecurity and technology crime, and financial intelligence and investigations police bureaus. It also spans the SFC’s enforcement and intermediaries divisions.
The working group “is instrumental to fast-tracking of vital intelligence exchange and joint collaboration in responses to the challenges arising” from virtual-asset trading platforms, Eve Chung, an assistant commissioner at the police force, said in the statement.
