**Key Takeaways**
– Infamous JPEX crypto exchange scandal shakes Hong Kong’s crypto reputation.
– Securities and Futures Commission (SFC) and HK Monetary Authority (HKMA) revise crypto policy.
– Retail investors restricted from certain virtual asset-related products.
– Hong Kong residents losing interest in crypto amidst rising concerns.

What does Hong Kong’s updated crypto policy say?

The recent JPEX crypto exchange scandal has cast a shadow over Hong Kong’s emergence as a global crypto hub. Once regarded as a promising hub for cryptocurrency innovation, the city now faces skepticism from its residents, questioning the safety and integrity of digital assets within its borders.

In response to the growing concerns and market uncertainties, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) jointly announced a substantial revision of their existing crypto policy. This update reflects a more cautious and stringent approach toward virtual currencies.

The revised guidelines notably bar retail investors from purchasing specific virtual asset-related products. The SFC insists that this decision is prompted by the evolving market dynamics and an extensive industry inquiry. It has advised intermediaries dealing with virtual assets to evaluate their clients’ knowledge of virtual asset investments before proceeding with any transactions.

China will increase the trading days of the stock connect programs between the mainland and Hong Kong in the country’s latest move to open up the capital markets, the country’s top securities regulator announced Friday. pic.twitter.com/c2wM9S9I9P

— People’s Daily, China (@PDChina) August 13, 2022

Highlighting the global regulatory disparity surrounding virtual assets, the SFC emphasized that the risks identified back in 2018 still apply. To address these concerns, the updated policy classifies digital assets as “complex products.” This classification means that regulators will subject virtual assets to the same regulatory scrutiny as other financial products.

Additionally, crypto exchange-traded funds and products issued outside of Hong Kong are now considered complex products under the new guidelines. These changes come in the wake of the JPEX crypto scandal, which has left thousands of investors in financial turmoil, with reported losses nearing $200 million. Despite the arrests made in connection with the JPEX case, the alleged ringleaders remain at large.

This revision signifies a pivotal moment in Hong Kong’s crypto landscape, as the city’s residents grow increasingly cautious about investing in digital assets. A recent survey by the Hong Kong University of Science and Technology (HKUST) revealed that 41% of the city’s residents are now reluctant to invest in digital assets. Public sentiment toward cryptocurrencies has also soured due to the surge in phishing attacks, further eroding trust in the crypto ecosystem.

To Conclude

The JPEX scandal has undeniably shaken Hong Kong’s reputation as a crypto-friendly jurisdiction. The revised policy reflects a broader shift toward stricter crypto regulations to safeguard investors and restore confidence in the local crypto market. While these measures may curb illicit activities, they also underscore the need for comprehensive, globally coordinated regulations to ensure the long-term sustainability of the crypto industry. As Hong Kong navigates this challenging terrain, it faces the dual task of nurturing innovation while maintaining investor protection.

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