Crypto exchange grace period to remain unchanged in Hong Kong despite scandals

The recent JPEX and Hounax exchange scandals have resulted in losses exceeding $100 million.

A one-year grace period for cryptocurrency exchanges operating in Hong Kong will remain in place despite recent scandals.

According to local news reports on Nov. 27, Julia Leung, Hong Kong’s Under Secretary for Financial Services and the Treasury, stated, “Even if the grace period ends tomorrow, fraud will still occur, so there is no intention to modify the grace period and other measures for the time being.” 

As per new regulations introduced in June, crypto exchanges operating in Hong Kong must apply for a Virtual Asset Service Provider (VASP) license with the city’s Securities & Futures Commission by June 2024 or face deregistration. However, unregistered exchanges can operate in the city during the interim transition period. 

Several crypto scandals have rocked the special administrative region recently. In September, Hong Kong crypto exchange JPEX, which was unlicensed at the time, collapsed after allegations of a Ponzi scheme that led to 66 arrests and an estimated 1.6 billion Hong Kong dollars ($205 million) in losses. 

On Nov. 25, Hounax, another unlicensed crypto exchange operating in Hong Kong, reportedly scammed 131 residents out of 120 million Hong Kong dollars ($15.4 million) through yet another alleged Ponzi scheme. Chan Waikei, superintendent of the Hong Kong Police’s commercial crime bureau, explained that scammers impersonated investment experts and solicited users with the promise of high returns. When users later tried to withdraw the funds, they could not do so. 

On Nov. 27, Cointelegraph reported that the Binance-linked HKVAEX exchange is still trying to apply for a license in Hong Kong. Earlier this month, BC Technology Group, owner of Hong Kong crypto exchange OSL, secured a $90M investment from blockchain firm BGX. 

Related: Binance-linked HKVAEX still preparing to apply for license in Hong Kong