The recent JPEX scandal has scarred the reputation of Hong Kong’s crypto industry, raising questions about the future of web3 and digital assets in the region. However, a speech by the region’s Financial Services and Treasury Secretary, Christopher Hui, at the ongoing Hong Kong Fintech week put minds at ease. Hui declared that the $165 million scandal would not affect Hong Kong’s Web3 plans.

Hong Kong Web3 Plans To Continue Despite JPEX Scandal

The Secretary highlighted the government’s plans to implement some rules to regulate crypto following the scandal. In his November 1 speech, Hui said, “We’ve been asked many times whether JPEX will affect our determination to grow the Web3 market—the answer is a clear no.”

A recent fraud scandal relating to the Dubai-based crypto exchange JPEX caused losses for over 2,500 Hong Kong citizens. The issue attracted the attention of the Hong Kong Police Force and the Securities and Futures Commission (SFC).

Last month, the SFC told the public that JPEX promoted its services in Hong Kong without acquiring a license. The warning, issued on September 13, noted that JPEX’s products, involving deposits, savings, and earnings of virtual assets, were illegal.

The regulator warned investors to remain cautious about investment opportunities that appear too promising. Following the SFC’s warning, JPEX increased withdrawal fees on its platform to 999 USDT, citing issues with its liquidity providers.

The scandal escalated, leading to the arrest of some influential businessmen connected to JPEX by the Hong Kong Police.

Hong Kong To Tighten Crypto Regulation

Due to the unfortunate circumstances surrounding the JPEX event, people wonder whether the government will abandon its Web3 plans. However, the reverse is the case. Instead, Hong Kong plans to tighten its reins on the crypto industry to ensure such scenarios never repeat.

According to Hui, several things are ongoing on the regulatory front. On September 19, John Lee Ka-Chiu, Hong Kong’s Chief Executive, revealed that the government will increase efforts to protect investors.

Ka-Chiu said the government will create awareness to inform investors to invest on only SFC-registered platforms.

Also, the SFC established a joint task force with the Hong Kong Police to tackle illicit activities on crypto exchanges.  On October 4, the SFC said the new group would monitor and investigate illegal activities of virtual assets trading platforms.

The group will conduct joint investigations, assess risks of suspicious virtual assets platforms, and relay the information from their findings. This will help the SFC and relevant authorities to bring enforcement actions on such media.

The SFC has released the list of licensed virtual assets trading platforms, including those whose applications are pending. Also, the list includes exchanges about closing down due to compliance issues and suspicious trading platforms.

Meanwhile, as part of Hong Kong’s Web3 regulatory plans, the SFC will issue guidelines on tokenized securities. The SFC will also authorize and oversee the tokenization of investment products, according to the Financial Secretary.