South China Morning Post Article Why can’t the JPEX incident shake Hong Kong’s cryptocurrency vision?

Why can't the JPEX incident shake Hong Kong's cryptocurrency vision?' - South China Morning Post

Author: Lily Z. King, Cobo COO

Editor’s note: The article by Lily Z. King, Cobo COO, was published on the South China Morning Post website on October 5th, discussing the impact of the JPEX incident on the cryptocurrency industry in Hong Kong.

• It is worth mentioning that Hong Kong’s licensing system can solve the regulatory challenges exposed by JPEX, making it safer for retail investors.
• This incident also highlights that the cryptocurrency industry is maturing, not just limited to speculation, and the increasing interest from enterprises and institutions is expected to bring a more stable digital economy.

It has always been clear that Hong Kong is determined to become a global digital asset center. The government’s unremitting efforts to create a favorable ecosystem for digital assets have consolidated its broader vision of maintaining financial competitiveness on the international stage. However, the recent collapse of JPEX, a cryptocurrency exchange headquartered in Hong Kong, has disrupted the rapidly growing cryptocurrency industry in Hong Kong.

• Forbes Binance’s Golden Touch, how did they turn failed ICO tokens into unexpected fortunes worth billions of dollars?
• Web3 Legal Popularization丨Can GameFi Go Online Without a Game License and Constitute Illegal Operations?
• Crypto Race Weekly Report [10/9/2023] Decrease in ETH Staking Rewards, POW Track on the Rise

In mid-September, JPEX imposed exorbitant withdrawal fees, effectively limiting users’ ability to withdraw funds. The incident affected thousands of people and caused an estimated economic loss of over 1 billion Hong Kong dollars ($127 million). It not only triggered a police investigation but also severely damaged the public’s perception of cryptocurrencies.

The JPEX scandal undoubtedly cast a shadow over Hong Kong’s cryptocurrency vision. This incident may raise doubts among the public about other Web3 initiatives implemented by the government.

We even heard one institutional investor say, “Hong Kong gamblers already have horse racing, why do we need Web3?”

On the flip side, by addressing the regulatory challenges exposed by the JPEX incident, Hong Kong has the potential to enhance the security of retail investors. This once again demonstrates the necessity of implementing a licensing system for virtual asset trading platforms in Hong Kong.

Given the volatility, security risks, and technological barriers in the current cryptocurrency market, we predict that retail investment is unlikely to experience significant growth in the short term. However, we have seen encouraging signs of institutional adoption of digital assets and blockchain technology.

The institutional sector has recognized the potential of cryptocurrencies, no longer limited to a speculative channel but also as a revolutionary future financial infrastructure. In particular, the Hong Kong government continues to promote the tokenization of real-world assets.

Ms. Fanny Tsai, a member of the Hong Kong Securities and Futures Commission’s Investment Products Division, mentioned at the recent “2023 Bloomberg Buy-Side Forum” that the Commission is currently formulating more detailed guidance on the tokenization of authorized investment products.

The Hong Kong Monetary Authority is expanding its first global tokenized green bond pilot project and outlined in a recent report the next steps that could be taken to promote tokenization in the Hong Kong bond market.

Blockchain technology is also being adopted by an increasing number of mainstream companies. Grab, a “super app” in Southeast Asia with 180 million users, is a typical example. The company recently launched a Web3 wallet for its Singapore users. This wallet, supported by Polygon, demonstrates the application of digital currency in the real world and promotes the payment of new stablecoin.

Admittedly, the road to mass adoption of digital assets is challenging. However, the progress made by institutional forces in bridging the gap between traditional finance and cryptocurrency finance is worth noting.

Institutions have strict requirements for stability, security, and customizability. Therefore, cryptocurrency infrastructure companies are developing advanced custody and wallet solutions to reduce counterparty risk and improve transparency and user control. For example, MPC (Multi-Party Computation) wallets and smart contract wallets that allow multiple parties to jointly manage and control funds within a wallet.

During the last speculative bubble, the digital asset market was mainly driven by the desire to get rich quickly, attracting retail investors, including JPEX.

However, we are now at a crucial moment where the cryptocurrency industry must prove its ability to have a real impact on the real economy. Just as many institutions quickly joined the AI revolution because AI can effectively improve productivity.

Although the JPEX incident posed challenges to Hong Kong’s cryptocurrency ambitions, it also indicates that the cryptocurrency industry is maturing and moving beyond speculation. Significant progress has been made in stablecoins, payments, and real-world assets. The expected rapid adoption by institutions is expected to bring a more stable and revolutionary digital economy to Hong Kong and the entire Asia.

This article is based on an English translation for reference only. Click “Original Article Link” at the bottom of the article to read the original English version.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!