Hong Kong Crypto Licensing Yet to Result in Job Surge

Hong Kong’s HashKey Adds AVAX TradingHashKey Hong Kong, the Chinese autonomous territory’s first licensed retail crypto exchange, has unveiled an addition to its platform with the launch of Avalanche (AVAX) trading.According to an announcement published to its website on Wednesday, HashKey has listed Avalanche on Thursday with the caveat that access to AVAX trading will be reserved for professional investors, as defined by Hong Kong’s Securities & Futures Commission (SFC).Photo by Wance Paleri on UnsplashAccessible to professional investorsTo meet the criteria as a professional investor in Hong Kong, individuals must possess an investment portfolio valued at a minimum of 8 million Hong Kong dollars, roughly equivalent to $1 million. This decision sets AVAX apart from other widely traded cryptocurrencies, such as Bitcoin and Ether, which remain accessible to retail investors in Hong Kong. While Tether (USDT) enjoys retail status, the majority of altcoins on HashKey will remain the preserve of professional investors.This move is a direct result of the SFC’s proactive stance on regulating the rapidly expanding crypto market in Hong Kong. Since the introduction of regulated retail crypto trading in the Chinese autonomous territory in August, the SFC has imposed rigorous requirements on exchanges. HashKey mandates users to deposit a minimum of 10,000 Hong Kong dollars or $1,500 into their exchange accounts as part of the Know Your Customer (KYC) verification process.Low trading volumeAmid these regulatory challenges, HashKey Hong Kong currently reports a 24-hour trading volume of approximately $5.3 million, significantly lower than its global peers. This lower trading volume suggests that stringent regulations may be affecting the exchange’s ability to attract retail investors effectively.The path to regulatory compliance in Hong Kong has been anything but smooth for crypto exchanges. Reports indicate that these platforms have collectively invested over $25 million in establishing the requisite infrastructure for obtaining a Hong Kong Virtual Asset Service Provider (VASP) license. It was reported earlier this year that crypto firms are forking out between $2.55 million and $25.5 million in order to secure a VASP trading license.Despite the challenges, HashKey is looking at various avenues in bringing its offering forward. Earlier this month the firm signed a memorandum of understanding (MOU) with insurer OneDegree. That collaboration could be significant as it should lead to the assets of HashKey users being protected and insured on the platform. That would solve a major issue for participants in the crypto space amid the backdrop of ongoing platform failures and hacks.JPEX collapseEven as regulatory efforts intensify, the crypto industry in Hong Kong has not been impervious to bad actors. The recent collapse of the JPEX crypto exchange earlier this month serves as a stark reminder of the ongoing risks associated with the industry. Described as the largest financial fraud in Hong Kong’s history, JPEX faced allegations of embezzling over $178 million of investors’ funds. Notably, JPEX was operating without SFC registration at the time of the alleged embezzlement.In response to such incidents, the SFC has taken proactive measures by publishing a warning list of crypto exchanges considered non-compliant within the Chinese autonomous territory.

Singaporean Authorities Uncover $1.3M Crypto Mining ScamFour foreign nationals are facing charges in a Singaporean court related to a cryptocurrency mining investment scheme that allegedly cheated investors out of over S$1.8 million ($1.3 million).According to reports in local media, the accused individuals are associated with A&A Blockchain Technology Innovation, a Singaporean company that was previously investigated for potential cheating offenses related to the very same crypto mining scheme in 2022. The accused include Dutch national Yang Bin, who was the Chairman of A&A Blockchain at the time of the offenses, and Lu Huangbin, Wang Xinghong, and Chen Wei, who held various roles within the company. Lu, Wang, and Chen are Chinese nationals.Photo by Arul Kumaran on UnsplashConspiracy to cheat chargesThe four individuals are collectively facing twelve counts of engaging in a conspiracy to cheat, involving the aforementioned sum of money. Additionally, they are charged with carrying out payment services without the required license.The charges are connected to a cryptocurrency mining investment scheme offered by A&A Blockchain between May 2021 and February 2022. The scheme promised investors a fixed daily return of 0.5 percent, luring them in by falsely claiming ownership of a large number of cryptocurrency mining machines.Unlicensed crypto exchangeDuring the period of August 2021 to February 2022, A&A Blockchain operated a cryptocurrency exchange named AAEX, facilitating the trading of multiple cryptocurrencies. However, the company operated without a proper license from the Monetary Authority of Singapore (MAS) for providing payment services in the country.Under the Penal Code, those convicted of cheating offenses can face penalties that include fines, imprisonment for up to a decade, or both. The accused face a total of 12 cheating charges, out of which 10 are amalgamated charges. If convicted of an amalgamated charge, the punishment could be doubled for a single incident of the offense. Furthermore, engaging in payment services without the necessary license can lead to a jail term of up to three years, a fine reaching S$125,000 ($92,000), or both.The cases against Chen, Wang, and Yang have been adjourned until next month. Meanwhile, Lu’s pretrial conference is scheduled for a later date in September. The charges against these individuals come in the wake of a large-scale operation targeting anti-money laundering offenses within the city-state.The operation resulted in the arrest and charging of ten individuals suspected of forgery, money laundering, and resisting arrest. The group had reportedly amassed assets worth approximately S$1 billion ($736 million), residing in affluent properties and owning luxury vehicles.Good actorsThe nascent nature of crypto is being used as a cover for scammers and while those bad actors get a disproportionate level of coverage, there are plenty of good actors engaging positively with the innovation at hand.As an example of genuine efforts being made in crypto mining, Beijing-based Canaan, a leading mining equipment manufacturer, intends to hold an event in Singapore next month to celebrate ten years in the business. Singapore is also home to well-known crypto miner, Bitdeer, a company with significant mining operations in North America, Bhutan, Norway, and elsewhere.As the industry matures and makes a better fist at self-regulation, in tandem with ever-improving regulations and controls at a national level, scammers using crypto-related activities as a foil for their criminal enterprise will be forced out of the sector.

Crypto Influencer Arrested in Hong Kong Over JPEX AssociationHong Kong police have taken prominent social media influencer and former lawyer Joseph Lam into custody. Known as “Jolamchok” on Instagram, Lam has been arrested due to his connection with the troubled cryptocurrency exchange, JPEX.According to a report from the South China Morning Post (SCMP) on Monday, law enforcement officials conducted a search of his office, where they seized various items of potential evidence, including a plastic bag containing banknotes.Photo by niu niu on UnsplashCelebrity promotionThe Hong Kong regulator, the Securities and Futures Commission (SFC), recently issued a warning squarely pointing fingers at JPEX for actively enlisting online celebrities like Joseph Lam and over-the-counter (OTC) money changers to promote the platform’s services and products to the Hong Kong public. Hong Kong police are understood to have searched the offices of local OTC exchange service Coingaroo. That action is suspected to be related to the issues that have befallen JPEX.An unverified report suggests that Lam, who is also known as Lin Zuo, may have presented questionable investment “schemes” to a cryptocurrency investment chat group. One of the reported victims was allegedly persuaded to invest 100,000 Hong Kong dollars (approximately $12,800) in cryptocurrencies.In one instance, Lam made claims within the group, stating that people were relentlessly pursuing him for payments and that the amount of money involved was five times higher than usual.“Whatever doesn’t kill you makes you stronger”On September 17, the day before his arrest, Lam shared a news article on his Instagram account, suggesting that he had not been negatively affected by the JPEX investigations. The caption read, “Whatever doesn’t kill you makes you stronger.”Following this development, Lam visited the police alongside his legal representatives to provide the necessary information regarding his involvement with JPEX. In a related development, another crypto influencer, Chen Yi, is understood to have been arrested. Yi is suspected of conspiracy to commit fraud.Liquidity crisisJPEX has publicly attributed its liquidity crisis to regulatory pressures and “third-party market makers.” In response, the exchange increased withdrawal fees and suspended certain operations. They have, however, promised to restore liquidity from third-party market makers promptly and gradually return withdrawal fees to normal levels, with details to follow after negotiations.JPEX maintains that it was being treated unfairly. The exchange also said that it would freeze new trades while existing trades would continue to be active until completion.This arrest and the ongoing issues surrounding JPEX come amid wider concerns in the cryptocurrency sector. A recent report from Bitfinex indicated that capital outflows from the crypto markets amounted to a staggering $55 billion in August alone. This substantial outflow has not only impacted Bitcoin but has also affected the liquidity of Ether and stablecoins, underlining the broader challenges faced by the crypto sector.As the investigation into Joseph Lam’s involvement with JPEX continues, it remains to be seen how this development will impact the ongoing troubles facing the cryptocurrency exchange and the broader crypto ecosystem in Hong Kong and beyond.