Hong Kong Chief Says Regulators May Get Powers to Crack Down on Unlicensed Crypto Exchanges: Report

The Securities and Futures Commission said it does not have the power to close unlicensed crypto exchanges.

AccessTimeIconNov 28, 2023 at 5:26 p.m. UTC
Updated Mar 8, 2024 at 5:42 p.m. UTC

If regulators need more powers to crack down on unlicensed crypto exchanges, the "government will actively cooperate," Hong Kong Chief Executive John Lee said on Tuesday, a local outlet reported.

The comments were in response to an investigation into unlicensed virtual-asset trading platform Hounax, which reportedly defrauded people of millions of dollars. By Monday, 145 people said they had been victims of the fraud for a total of HK$148 million ($19 million), the South China Morning Post reported.

Government supervision is needed to protect investors and crack down on unlicensed platforms, Lee said according to the report. The Hounax case follows a similar one involving crypto exchange JPEX, which led to the arrest of six people in September after more than a thousand complaints involving a total of $128 million were filed. The Securities and Futures Commission (SFC) said JPEX was also operating without a license, prompting Lee to call for stronger licensing laws at the time.

Following the Hounax incident the SFC published a list of licensed virtual-asset trading platforms to aid investors when they are deciding which crypto platforms to use. The SFC said it does not have the power to close unlicensed crypto exchanges, the SCMP reported.

Hounax was put on the alert list by the SFC on Nov. 1, and authorities should have gone a step further and blocked the platform from contacting the public to prevent further harm, lawmaker Doreen Kong told a local outlet on Monday.

"How can they just rely on an alert list and say they have issued a message to the public? It's like telling people that it's every man for himself," Kong said.

Edited by Sheldon Reback.


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Camomile Shumba

Camomile Shumba is a CoinDesk regulatory reporter based in the UK. She previously worked as an intern for Business Insider and Bloomberg News. She does not currently hold value in any digital currencies or projects.