Ta Kung Pao: JPEX incident will not affect Hong Kong’s plan to promote financial innovation

Source: Ta Kung Pao

Law enforcement actions against the virtual asset trading platform JPEX involving unlicensed operations and fraud are still continuing, and the SAR government attaches great importance to this. Chief Executive Lee Ka-chiu said yesterday that the incident reflected the importance of supervision, platform licensing and personal understanding. Li Jiachao pointed out the key to promoting financial innovation and developing virtual economy in Hong Kong. Hong Kong is an area governed by the rule of law. The law must be followed and law enforcement must be strict. However, it is necessary to further improve the regulatory system. Only by better protecting the interests of investors can the international community's confidence in Hong Kong as an international financial center be further enhanced.

The widespread application of new technologies such as blockchain, artificial intelligence, cloud computing, and big data has provided efficient new methods for investment activities such as payment, settlement, lending, fund-raising, and insurance, and has brought unprecedented opportunities for innovation in the financial industry. In recent years, fraud and “explosion” incidents involving virtual asset trading platforms have occurred in the United States, Singapore and other places, with huge amounts of money involved, showing that the supervision of new business formats is a common challenge faced by governments across the country. From this perspective, the JPEX case in Hong Kong is not surprising.

The SAR government is determined to promote financial innovation and issued a policy declaration on the development of the virtual economy at the end of last year. The new licensing system came into effect on June 1 this year. In less than four months, JPEX, which was involved in illegal operations, was busted, which reflects that Hong Kong’s regulatory system is working. Prior to this action, the Securities and Futures Commission had been closely monitoring relevant trading platforms. In July last year, JPEX was included in the list of unlicensed companies and suspicious websites. In the past year, it issued nine reminders calling on investors to be careful of unlicensed and overseas trading platforms. Risks can be said to have been fulfilled.

However, it is undeniable that this case shows that Hong Kong needs to further improve relevant market supervision. As some members of the Legislative Council pointed out, the China Securities Regulatory Commission gives unlicensed operators one year to withdraw. This "window period" is too long and provides an opportunity for fraud groups to take advantage of. JPEX is using the guise of "applying for a license" to intensify its illegal marketing activities, including using false advertising and using the appeal of Internet celebrities and celebrities to lure investors into the game. Although the Securities and Futures Commission issued repeated warnings, it failed to enforce the law until the case was referred to the police earlier. This is the most controversial aspect of this case. If the relevant departments had taken action earlier, the losses in the case could have been reduced.

At present, the number of victims reported to the police has increased to more than 1,600, involving 1.2 billion Hong Kong dollars. It is reported that there are as many as 8,000 members in the suffering group. There is reason to believe that the relevant cases have just revealed the tip of the iceberg. Preliminary investigation also showed that the victims were mainly influenced by advertisements and Internet celebrities to invest, and handed over their cryptocurrency private keys to the platform for management. This is like "handing over a million dollars to a thief" and fully reflects that the investors have no relevant investment experience. In fact, although many people have heard of concepts such as virtual economy and cryptocurrency, they know little about them. Strengthening investor education is a top priority. Be a smart investor, invest in platforms that are licensed and regulated by the China Securities Regulatory Commission, and understand the investment risks. This kind of publicity should be done frequently so that it can be deeply rooted in the hearts of the people.

For the SAR government, promoting the virtual economy needs to be gradual, and supervision at the retail level needs to be stricter. Also, can unlicensed trading platforms advertise? Do Internet celebrities and celebrities need to bear legal liability if they participate in false propaganda? The case has exposed some areas of ambiguity that await clarification.

The virtual economy is an emerging thing and has a development process from immaturity to maturity. This incident is an episode and a sobering agent. It will not affect Hong Kong’s plan to promote financial innovation, but it will allow the SAR government to have a deeper understanding of the risks and challenges of financial innovation. We may encounter such and such in the future. question. But as long as we act scientifically, go all out, and keep pace with the times in terms of supervision, Hong Kong's status as an international financial center will continue to be consolidated.