'' T go to unregulated ones,'' Yue said, while pointing to JPEX, which collapsed after the demise of FTX last year. The scandals are a sign of the importance of regulation, he said.
While underscoring the need for consumer education, HKMA launched a Consumer Protection against fraud charter in June, asking merchants not to send hyperlinks to customers in their electronic messages. Electronic advertisements of the campaign are being used in Hong Kong's subway stations.
Yue has said in an interview that followed last month's JPEX scandal, which has dealt a significant blow to the public trust.
The development of Hong Kong's digital asset ecosystem will need stronger guardrails and more public education to protect investors, the Hong Kong Monetary Authority's CEO Eddie Yue Wai said in an interview, as the city grapples to limit the damage from the recent implosion of a cryptocurrency exchange that claimed 2,305 victims who lost about HK$1.43 billion of investments.
The number of cryptocurrency-related crimes in Hong Kong is on the rise, with 1,337 complaints in 2021 a 67 per cent increase from 1,397 cases logged in 2021. The cases were about HK$1.7 billion in assets, a 106 per cent increase from the year before.
The initiative has enabled licensed cryptocurrency exchanges to accept retail traders.
The government's plan to create a vibrant digital asset ecosystem is a result of regulation for cryptocurrency trading platforms. The tokenisation market had a lot of promise, Yue said, including tokenised bonds, equities and bank deposits.
The HKMA was also leading ongoing pilot schemes such as the testing of the digital currency, the e-HKD, among banks and technology firms. In the future, Hong Kong's digital asset ecosystem will not limit itself to cryptocurrency trading, but will also include many other elements such as stable coins and central bank digital currencies, Yue said.
There's got to be a lot more investor education, Yue said. Investors and regulators must recognise that there are scams and 'enforcement needs to be done in a very vigilant way, in a rightly designed regulatory system', he said.
Only Hash Blockchain Limited and OSL Digital Securities Limited have been licensed to serve Hong Kong's retail customers since the new virtual asset regulations came into effect on June 1. The SFC said applications have also been received from HKVAX, HKBitEx, Hong Kong BGE and Victory Fintech.
This sentiment was echoed by Deloitte's Hong Kong digital asset leader, Robert Lui, consultancy Deloitte.
Although institutional investors have the resources and background to make sound investment decisions, the general public does not.
The Hong Kong government and regulators should establish a transparent and fair mechanism for dispute resolutions specific to the digital assets market, and also to promote better investor education in virtual assets, Lui said.