Author | Carl

Editor | C

Techub News Original (ID: TechubNews)

In promoting the new licensing system for virtual asset exchanges, the Securities and Futures Commission of Hong Kong has taken another step forward.

On September 13, the Securities and Futures Commission of Hong Kong issued an announcement stating that the unregulated virtual asset trading platform JPEX had not applied for a license with the Securities and Futures Commission of Hong Kong. Previously, the Securities and Futures Commission of Hong Kong had issued risk warnings for unlicensed exchanges, but this was the first time it had specifically named a particular exchange.

In response to this news, the token JPC on the JPEX exchange platform experienced a drop of over 30%, and JPEX staff at the Token2049 event in Singapore also left early.

Currently, Hong Kong's virtual asset licensing system is facing difficulties, with unregulated cryptocurrency exchanges on one side and a declining enthusiasm for licensing among virtual asset exchanges on the other. In contrast to the high cost of applying for a license, the outlook for the Hong Kong market is not optimistic.

Apart from compliance, the future of Hong Kong's Web3.0 may require more innovation and exploration.

1. Hong Kong Securities and Futures Commission Warns JPEX to Abandon License Application

On September 13, the official website of the Securities and Futures Commission of Hong Kong issued a statement titled "Warning Statement Regarding Unregulated Virtual Asset Trading Platforms," stating that the virtual asset trading platform JPEX actively promoted its services and products to the Hong Kong public through social media influencers and over-the-counter virtual asset currency exchanges, but JPEX did not have a license from the Securities and Futures Commission of Hong Kong and had not applied for the relevant license.

The statement also pointed out suspicious aspects of JPEX, such as offering extremely high returns, claiming to have obtained a virtual asset license from overseas regulatory agencies which was not true, and user complaints.

On the same day, the official public account of the Securities and Futures Commission of Hong Kong published an article titled "JPEX Has No License, Be Cautious!" reminding investors to remain highly vigilant and take precautions, as trading on unlicensed platforms could lead to financial losses.

This is the first time since the new virtual asset trading license system took effect on June 1 of this year that the Securities and Futures Commission of Hong Kong has specifically named a virtual asset exchange. Prior to this, the Securities and Futures Commission of Hong Kong had issued warnings to the public about related risks.

On August 7, the Securities and Futures Commission of Hong Kong issued an announcement noting that certain unlicensed virtual asset trading platforms falsely claimed to have submitted license applications to the Commission, which misled the public into thinking that these platforms complied with the Commission's regulations. At the same time, the Securities and Futures Commission of Hong Kong also published a link to check the licensed status of platforms.

According to Techub News, the only virtual asset trading platforms currently licensed are OSL Exchange and HashKey Exchange.

In response to the announcement from the Securities and Futures Commission of Hong Kong, JPEX stated on the same day that it intended and planned to apply for a license in Hong Kong, but due to the time required for application deployment and preparation of legal documents, it had not formally submitted an application.

JPEX believes that the Commission's announcement conflicts with the Hong Kong government's intention to build the image of a Web 3.0 hub, and it will consider canceling its license application in the Hong Kong region and adjusting its future policy development.

According to insiders, JPEX is a virtual asset exchange established by Chinese individuals and had indeed conducted promotional activities in Hong Kong. Advertisements for the platform could also be seen on the streets of Hong Kong.

On September 14, KOL killthewolf.eth posted on X (formerly Twitter) to warn users to use "wild chicken exchanges" less. He stated that withdrawing 1000U on the JPEX exchange incurs a fee of 999U. Currently, there were no staff members at the JPEX booth at the Token2049 event in Singapore.

According to individuals at the Token2049 event, JPEX staff left the venue early on the 14th, but there were still display boards left at the booth.

According to the JPEX official website, on the morning of September 14, the JPC token on the JPEX platform dropped by over 30% within 10 hours.

2. Declining Enthusiasm for License Applications

On June 1 of this year, the "Guideline on the Regulation of Virtual Asset Trading Platforms" was officially implemented in Hong Kong.

According to the guideline, centralized virtual asset trading platforms operating in or promoting services to Hong Kong investors must obtain a license from the Securities and Futures Commission of Hong Kong and be regulated by it. Virtual asset trading platforms that had already been operating in Hong Kong with licenses issued under the 1st and 7th regulations by the Securities and Futures Commission of Hong Kong were granted a one-year exemption period and needed to supplement their existing licenses.

Industry analysts stated that JPEX did not fall into either of the above categories, and therefore continuing to operate in Hong Kong indeed raised suspicions of violating relevant regulations.

"From issuing warnings, publishing compliance lists, to specifically naming warnings, the Securities and Futures Commission of Hong Kong is gradually tightening regulation and implementing the relevant policies it had previously formulated. Unlicensed exchanges that continue to operate in Hong Kong will face significant risks," said the analyst.

Since Hong Kong's virtual asset development declaration was issued in October of last year, numerous virtual asset exchanges and traditional institutions have shown interest in Hong Kong and announced their embrace of the new virtual asset licensing system.

According to media reports, virtual asset exchanges such as OKX, Binance, Huobi, Xinhua Technology, HKVAX, Bitget, HKbitEX, Bullish, Gate.io, and traditional institutions such as Fuqiang Securities, Lion Group, Shengli Securities, and Xinque Technology had previously announced their applications for Hong Kong's virtual asset license. Lily Z King, Chief Operating Officer of Cobo, stated in an interview with the media that there were 140 companies applying for virtual asset licenses in Hong Kong.

On August 3, Hashkey and OSL announced that they had obtained an upgrade to their virtual asset licenses, allowing them to provide services to retail users.

However, industry analysts stated that the growth of users on compliant exchanges in Hong Kong was not ideal. The market size of users in Hong Kong is limited, and due to the bear market, the expectations of the general public in Hong Kong for the cryptocurrency industry are not high.

A Web3 practitioner who had obtained Hong Kong residency through the Hong Kong Talent Admission Scheme told Techub News that opening an account with Hashkey still had a high threshold. Despite obtaining Hong Kong residency, they were unable to open an account because they were required to provide proof of renting in Hong Kong.

"I need to travel between Shenzhen and Hong Kong for work, but the rent in Hong Kong is too expensive, so I chose to live in Shenzhen. I didn't expect that I still couldn't open an account with Hashkey," the Web3 practitioner said.

Currently, the enthusiasm of various exchanges to apply for virtual asset licenses has declined.

Industry analysts stated that exchanges primarily value the importance of the Hong Kong market and the development prospects after compliance, but the development of the two compliant exchanges has made people start to doubt their previous expectations. On the other hand, the cost of applying for a license is high and also faces uncertainty.

According to media reports, the cost of applying for a virtual asset license in Hong Kong is around 100 million Hong Kong dollars.

Weng Xiaoqi, COO of HashKey Group, stated in an interview with the media that it is expected that only 5-8 exchanges will eventually obtain a Hong Kong license, and it is expected that 80% of the exchanges currently applying for a license will withdraw their applications.

Industry analysts stated that a balance needs to be struck between compliance and innovative development, as excessive compliance makes it difficult to develop. They suggested that Hong Kong needs to provide some space for innovative development on the basis of compliance, and compliant exchanges should also engage in more innovation and exploration, such as lowering the threshold for user registration, promoting Web3 to more people in Hong Kong, and allowing exchanges to offer more trading pairs and functions.

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