The Hong Kong government says the recent $165 million theft scandal from cryptocurrency exchange JPEX will not undermine its vision for Web3 in the region. Speaking at Hong Kong FinTech Week on November 2, the region’s financial services and treasury minister, Christopher Hui, said the story had not affected the government’s plans. “We have been asked many times whether JPEX will affect our determination to develop the Web3 market. The answer is a clear NO,” he said.
Hui was referring to a financial scandal involving the Dubai-based exchange JPEX. More than 2,500 Hong Kong residents claim they were defrauded, prompting the Securities and Futures Commission (SFC) to warn that JPEX was promoting its services locally without a license. Hong Kong said it would tighten cryptocurrency regulations following JPEX’s actions. In addition, the SFC has established a task force with the police to combat illegal digital asset exchange activity and updated its policy on cryptocurrency sales requirements.
Hui said “a lot of things are happening on the regulatory front” – part of the government’s future plans to regulate Web3 is the SFC issuing guidelines on tokenized securities and the tokenization of investment products permitted by the SFC. Cryptocurrency rules will also be expanded to cover buying and selling “beyond transactions taking place on regulated trading platforms,” he noted.
A “highly sought-after” joint consultation on stablecoins by the Hong Kong Monetary Authority (HKMA), Financial Services and Treasury Bureau will also be completed soon, incorporating feedback from the HKMA’s January discussion paper. Earlier this year, it was reported that the HKMA was encouraging banks to provide services to cryptocurrency companies in the region. Hui said the HKMA will consult with the sector on guidelines for banks providing cryptocurrency custody services.
Meanwhile, payment processor Visa has already completed a pilot program to test Hong Kong’s central bank digital currency (CBDC) with HSBC and Hang Seng Bank. According to the November 1 announcement, the e-HKD program involves deposit tokenization, where money deposited into a bank is minted on the company’s own blockchain ledger backed by its balance sheet. Additionally, during the pilot, Visa said its platform was capable of operating 24/7, outperforming traditional payment systems that do not operate after hours or on weekends. As next steps, the payments processor says it is exploring tokenized asset markets and programmable finance.