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Hong Kong's Crypto Industry Faces Trust Crisis After JPEX Scandal

Key Takeaways
  • JPEX scam in Hong Kong involved a $200.7 million fraud, leading to a decline in trust in cryptocurrencies, with 28 arrests
  • A recent survey indicates a 12% increase in Hong Kong residents preferring not to hold virtual assets, and only 20% want to hold crypto in the future
  • Despite declining trust, 8% of retail investors in Hong Kong have invested in cryptocurrencies, but concerns about regulation and fraud persist, challenging Hong Kong's cryptocurrency ambitions
17-Oct-2023 By: Simran Mishra
Hong Kong's Crypto I

Shift in Cryptocurrency Attitude Following JPEX Scandal in Hong Kong

A recent survey highlights a marked shift in Hong Kong residents' attitude towards cryptocurrency, following a significant scandal involving the JPEX cryptocurrency platform. The scandal has cast a shadow over Hong Kong's aspirations to become a global hub for the cryptocurrency industry.

JPEX Scandal Impacts Trust

The JPEX platform was embroiled in a scam involving HK$1.57 billion (US$200.7 million), affecting thousands of investors. This led to one of the most high-profile enforcement actions in Hong Kong's virtual asset sector, with 28 individuals arrested last month. The platform had promised up to 20% returns through extensive media advertising, luring many local retail investors. However, following a public warning by Hong Kong's securities watchdog, JPEX abruptly halted customer withdrawals, causing significant losses for some retail customers.

The survey conducted by the Hong Kong University of Science and Technology (HKUST) School of Business and Management indicates a notable decline in trust and interest in cryptocurrency among Hong Kong residents between September and October. The data reveals that 41% of respondents now prefer not to hold virtual assets, a 12% increase compared to the start of the year. Furthermore, only 20% of surveyed individuals expressed a desire to hold crypto in the future, marking a 5% decline since the beginning of the year.

Retail Investment in Crypto

Despite the negative sentiment, cryptocurrencies and non-fungible tokens (NFTs) continue to have a presence in Hong Kong. A separate survey by the Investor and Financial Education Council (IFEC) shows that 8% of retail investors in the city have invested in virtual assets, albeit only a 1% increase from 2019. Over half of the respondents voiced concerns regarding the lack of regulation in the industry, fearing potential fraud by investment platforms.

This changing attitude and the JPEX scandal underline the challenges faced by Hong Kong in its bid to establish a firm footing in the global cryptocurrency landscape.

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