Hong Kong’s financial regulators have decided to maintain the grace period for crypto companies despite the city grappling with major fraud scandals in recent weeks involving crypto exchange platforms JPEX and Hounax, local media reported on November 27.
The grace period allows crypto companies to continue operating without a license in Hong Kong until June 2024, allowing sufficient time to comply with the new regulatory standards introduced earlier this year.
Despite the recent scams, the Securities and Futures Commission (SFC) believes that abrupt changes to the grace period could be counterproductive and potentially destabilize Hong Kong’s fast-growing virtual asset sector.
SFC Director of Licensing and Fintech Unit Wong Lok-hei said:
“Scams can happen with or without the grace period.”
Meanwhile, SFC CEO Leung Fung-yee echoed the sentiment, saying investors should be wary of schemes that deliver unrealistically high returns.
She added that platforms like Hounax are not regulated entities and the SFC does not have the power to directly halt their operations.
High-profile crypto scandals
The total number of investment-related fraud cases in Hong Kong from January to September reached a whopping 4,331 – amounting to losses of approximately HK$2.82 billion.
The JPEX and Hounax cases, which involved deceptive advertising tactics and restrictions on withdrawals, have exposed significant gaps in regulatory oversight of digital assets.
The Hong Kong Police recently escalated their actions against fraudulent activities in the cryptosphere, arresting an additional 30 individuals linked to JPEX, bringing the total number of arrests to 66.
Despite these arrests, no formal charges have been filed and the suspects have been released on bail. The JPEX scandal has affected 2,623 people, with losses estimated at around HK$1.6 billion.
Meanwhile, authorities recently issued warnings against Hounax after 131 victims who collectively lost nearly HK$120 million filed complaints against the platform. The main reported loss involved a 69-year-old woman who was defrauded of HK$12 million.
In response to these incidents, the Hong Kong Police have advised the public to be vigilant, especially regarding unsolicited investment opportunities on social media, suspicious mobile apps and unverified websites. The SFC has also warned that platforms such as Hounax are suspicious and have used misleading tactics to lure investors.