In light of the recent JPEX scandal, Hong Kong’s Secretary for Financial Services, Christopher Hui, has stated that stablecoins will remain excluded from retail trading in Hong Kong until they are subjected to official regulation.
In a recent radio program with the Investor and Financial Education Council (IFEC), Hui emphasised the gravity of the alleged fraud case linked to JPEX.
He stressed the necessity of enhanced regulation within the virtual asset trading industry.
Hui highlighted Hong Kong’s current lack of regulatory framework for stablecoins, which prompted him to reveal the government’s latest plan – a temporary suspension of their inclusion in retail trading.
Hui acknowledged that historically, many virtual asset trading platforms have utilised stablecoins like USDT for trading.
However, Hui pointed out that stablecoins, ostensibly backed by assets such as the US dollar or gold, have experienced price volatility and even collapses.
He drew attention to the impact of reserve management on stablecoin stability and investor rights.
Hui stated that citizens have become increasingly aware of the risks associated with unlicensed virtual asset trading platforms (VATPs).
He underlined the perils of investing in unregulated platforms, characterised by their opacity and potential security vulnerabilities, leaving investors with little recourse in the event of disputes or platform failures.
Hui cited the recent case of JPEX in Hong Kong and the overseas closure of the FTX platform as illustrative examples.
Licensed platforms in Hong Kong are currently limited to facilitating the trading of Bitcoin (BTC) and Ethereum (ETH).
Any expansion of the cryptocurrency offerings requires submission of reports to the Hong Kong Securities and Futures Commission (SFC) for approval.
Coinlive previously reported on how the Securities and Futures Commission (SFC) announced in a statement the establishment of a dedicated joint working group targeted at Virtual Asset Trading Platforms
The newly formed division responds to the JPEX scandal, which allegedly inflicted losses of approximately HK$1.2 billion (equivalent to US$154 million) on over 1,600 investors.
Its primary goal is to facilitate the exchange of information concerning suspicious activities involving VATPs.