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Hong Kong ‘ready’ to capitalize on crypto’s next bull run: Hashkey Capital

November 10, 2023 Coin Telegraph

asia crypto market

Hashkey Capital partner of liquids funds and research, Jupiter Zheng, says the crypto sector in Hong Kong is now primed for significant growth over the next four to five years.

Hong Kong is “very ready” for the next wave of mass crypto adoption, with an influx of crypto talent that has been spilling into the aspiring digital asset hub, says Jupiter Zheng, a partner at Hashkey Capital.

Speaking to Cointelegraph, Zheng, partner of liquid funds and research at the investment arm of Hong Kong crypto firm HashKey Group — explained that the combination of new Web3 projects along with crypto-positive regulatory developments has primed Hong Kong for significant growth in the next four to five years.

“You’ve got all of these new, different projects, with their founders and teams here, which is all real GDP by the way. These teams are already boosting both banking and capital market activities."

Zheng added that while crypto prices haven’t reflected it, the level of sophistication being developed in the sector over the past 18 months had been striking.

“The actual technological improvement we’ve seen throughout the bear market has been quite astonishing. So I think from the technology side, we are very ready for the next wave of larger mass adoption in the crypto world,” said Zheng.

The reason for his bullishness for the region was based on h belief that the Hong Kong government is in dire need of a new economic driver, something that Zheng believes the crypto sector is ready to offer.

“The GDP in Hong Kong in recent years hasn’t been looking so good — largely due to Covid. So it needs a new driver,” Zheng said. “So it’s my theory that crypto and Web3 are the new drivers here.”

@mar2424 Jupiter Zheng, HashKey Capital's Partner of Liquid Funds and Research, spoke at a panel discussion at CVCF last week with the theme "Navigating the Web3 Investment Landscape: Emerging Trends to Watch in 2023–24". pic.twitter.com/P5Yg1StzfI
— HashKey Capital (@HashKey_Capital) November 6, 2023

On Aug. 3 this year, Hashkey became the first crypto exchange in Hong Kong to receive a specific license that allowed them to offer crypto assets to retail investors.

Zheng admitted that while he’s not directly involved in the exchange arm of Hashkey, he expects the demand for crypto products from local Hong Kong residents to grow as the government continues to shore up investor concerns by outlining its regulatory scheme for the sector.

“The recent policy changes give retail investors safety because now you’ve got insurance legal protections,” he said.

“You don't have to use online wallets to do self-custody. All you need to do is open an account on an exchange, and then you can use your Hong Kong dollars to buy Bitcoins and other crypto. It's quite easy.”

“For now it's still a bear market, but when the bull market comes back, we can assume that people’s outlook will change quickly. Retail will definitely be coming back, especially when they have a lot of opportunities to buy securely with licensed exchanges.”

Overall, Zheng predicts that Web3 in Asia and Hong Kong will witness a similar pattern of development to that of the GameFi sector in South East Asia in 2021, which saw Axie Infinity briefly become one of the most-played games in the world.

In Zheng’s view, while Axie was prone to massive speculation, the underlying model of development would be similar — projects that are developed in the U.S. and Europe could easily find a welcoming market in Asia.

“I think in the future Asia will still follow the same pattern. Protocols and infrastructure projects that are developed in the United States or Europe or Australia may not witness massive adoption where they’re developed — but if they want to find a market they can go to Asia.”

Zheng conceded that while growth will be less feverish than once seen in South East Asia, there’ll be more of a sober and well-regulated focus on protocols and blockchain infrastructure instead of rampant speculation on gaming.

Hong Kong's burgeoning virtual asset policy is paving the way for the future of #Web3

Our Partner of Liquid Funds and Research, @mar2424 shares his insights into the developments and opportunities that are reshaping the industry and the rest of the world at large.

Read more:
— HashKey Capital (@HashKey_Capital) November 7, 2023

It’s worth noting that Hong Kong was rocked by a crypto exchange scandal in September, in which an unlicensed exchange called JPEX allegedly swindled investors out of some $165 million. The fallout has since been described as the one of the worst financial crises to have ever hit the region.

Despite the debacle, Hong Kong’s secretary for financial services and the treasury Christian Hui assured a crowd of investors, government officials and other regulators at HK Fintech week that the JPEX drama hadn’t affected the government’s aspirations to turn Hong Kong into Asia’s crypto hub.

Hong Kong also pledged to tighten its crypto regulations after JPEX’s alleged actions. The SFC also set up a task force with the police to deal with illicit crypto exchange activities and updated its policies on crypto sales and requirements.

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Binance users in Hong Kong lose $450K in wave of fraud texts: HK police

October 10, 2023 Coin Telegraph

Binance users in Hong Kong lose 0K in wave of fraud texts: HK police

binance hong kong

Hong Kong police have issued a warning concerning a recent Binance phishing scam targeting Hong Kong users of the platform.

Hong Kong’s police force has raised the alarm after 11 Hong Kong-based Binance customers were targeted in a wave of phishing scams sent through text messages.

Hong Kong police warned users of the scam in an Oct. 9 post to its Facebook page dubbed “CyberDefender.”

“Recently, fraudsters posing as Binance sent text messages claiming that users must click the link in the message to verify their identity details before a deadline, otherwise their account would be deactivated.”

Beware of scammers. Stay #SAFU! pic.twitter.com/XZMDMKkBJf
— CZ Binance (@cz_binance) October 9, 2023

Police said that once users clicked the link and supposedly “verified” their personal details, hackers were then able to gain full access to their Binance accounts, where they proceeded to steal all of the assets contained within the users’ wallets.

According to the post, the phishing scheme has seen 11 Hong Kong-based Binance customers report combined losses of more than $446,000 (3.5 million Hong Kong dollars) in the last two weeks.

The police have asked any users who believe that they’ve received a potentially fraudulent message to log the suspicious messages on the “fraud prevention” section of its official website.

Additionally, the police displayed a link to a newly published list of verified virtual asset trading platforms, provided by the Hong Kong Securities and Futures Commission (SFC).

Currently, only two cryptocurrency exchanges — HashKey and OSL — are fully licensed for retail investment purposes in Hong Kong.

Established in May, CyberDefender is a project launched by the Cyber Security and Technology Crime Bureau of the Hong Kong Police Force, aimed at increasing local citizen’s awareness of online security risks.

Hong Kong police unveil 'CyberDefender' metaverse platform to combat rising digital crimes. https://t.co/xyqa0iWQxf
— Cointelegraph (@Cointelegraph) May 28, 2023

Meanwhile, Hong Kong crypto investors have been hit hard by scams and fraudulent activity in recent weeks, with the recent JPEX crypto exchange scandal ballooning to an estimated $180 million in losses and more than 2,300 Hong Kong-based investors filing complaints with local police.

JPEX was an unlicensed cryptocurrency exchange that allegedly lured in Hong Kong residents with flashy advertising and “suspiciously” high returns on its lending products. The exchange ratcheted up fees on withdrawals from its platform on Sept. 15, rendering funds inaccessible to its users.

Following the scandal, which has been described as the largest financial fraud ever to hit Hong Kong, the SFC announced that it would publish a list of both fully licensed and “suspicious” crypto platforms in a bid to combat potential fraud.

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Hong Kong to list ‘suspicious’ crypto platforms in wake of JPEX scandal

September 25, 2023 Coin Telegraph

Coin Telegraph

In the wake of the ongoing JPEX scandal, the Hong Kong Securities and Futures Commission says it will issue a public list of suspicious crypto trading platforms.

Hong Kong's financial regulator, the Securities and Futures Commission (SFC) has vowed to step up efforts to combat unregulated cryptocurrency trading platforms in its jurisdiction.

According to a Sept. 25 announcement, the SFC said it will publish a list of all licensed, deemed licensed, closing down and application-pending virtual asset trading platforms (VATPs) to better help members of the public identify potentially unregulated VATPs doing business in Hong Kong.

The SFC said it will also keep a dedicated list of "suspicious VATPs" which will be featured in an easily accessible and prominent part of the regulators' website.

*The new measures being introduced by the SFC to combat unregulated VATPs. Source: Hong Kong SFC*

The move follows the ongoing JPEX crypto exchange scandal which has been accused of promoting its services to Hong Kong residents despite not having applied for a license in the country.

It's estimated to have a financial fallout of around $178 million. At the time of publication, local police have received more than 2,200 complaints from affected users of the exchange.

A total of 11 people including crypto influencers, YouTubers, and employees of the allegedly fraudulent crypto exchange have been taken into custody for questioning.

In a statement, the SFC said the resulting fallout from JPEX "highlights the risks of dealing with unregulated VATPs and the need for proper regulation to maintain market confidence."

The regulators added that it would be working with local police to establish a dedicated channel for citizens to share information on suspicious activity and potential legal breaches by VATPs, as well as better investigating the JPEX incident to help "bring the wrong-doers to justice."

Since Hong Kong regulators introduced the new VATP licencing regime on June 1, only two cryptocurrency trading platforms — Hashkey and OSL Digital — have received a licence that allows them to provide service to retail customers.

Despite the recent catastrophe, the SFC noted that it had "long seen the potential benefits" offered to financial markets by cryptocurrencies and other digital assets. The regulator explained that it had also identified a number of risks associated crypto assets including money-laundering and investor protection concerns.

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Hong Kong govt pressures banking giants to accept crypto clients: Report

June 15, 2023 Coin Telegraph

Coin Telegraph

Hong Kong’s central bank reportedly asked major banks including HSBC, Standard Chartered and Bank of China why they aren’t accepting crypto exchanges as clients.

The Hong Kong Monetary Authority (HKMA), which serves as the region's central bank and regulator, has reportedly put pressure on major banks including HSBC and Standard Chartered to accept crypto exchanges as clients.

According to a June 15 report from the Financial Times, which cited three sources familiar with the matter, the HKMA questioned the UK-based firms as well as the Bank of China in a May meeting — asking the institutions why they weren’t taking on cryptocurrency exchanges as clients.

Less than a month before on April 27, the HKMA issued a circular to banking institutions urging them to pay attention to new market developments and encouraging them to adopt a more ambitious approach to new sectors such as the crypto market.

In the document, Hong Kong’s central bank specifically required the institutions to help crypto firms, which it calls “virtual asset service providers” (VASPs), in gaining access to banking services.

*HKMA circular to major banking institutions. Source: HKMA*

According to a source familiar with the content’s of last month’s meeting, the HKMA “encouraged the banks to not be afraid.” The source added that there is opposition to taking on crypto clients.

“We are seeing some resistance from senior executives at traditional banks,” they said.

Cointelegraph contacted the HKMA, HSBC and Standard Chartered for comment but did not receive an immediate response.

Hong Kong’s pro-crypto pressure comes amid a turbulent regulatory environment for exchanges in the United States.

On June 5, the U.S. Securities and Exchange Commission (SEC) sued Binance for violating domestic securities laws. The next day on June 6, the SEC sued Coinbase on similar allegations.

In a June 12 filing, Binance.US claimed that the SEC's lawsuit was placing significant pressure on its relationships with its banking partners in the U.S. Additionally, Binance Australia was recently forced to shut down all AUD services including withdrawals and deposits after its banking ties were severed by local payments provider Zepto.

Meanwhile, some lawmakers from Hong Kong appear more welcoming of crypto firms.

On June 10, Hong Kong Legislative Council member Johnny Ng expressed his support for embattled crypto firm Coinbase on Twitter and went as far as inviting it to establish operations on more friendly ground.

I hereby offer an invitation to welcome all global virtual asset trading operators including @coinbase to come to HK for application of official trading platforms and further development plans. Please feel free to approach me and I am happy to provide any assistance. pic.twitter.com/bcIi1IjMlc
— Johnny Ng 吴杰庄 (@Johnny_nkc) June 10, 2023

On June 1, Hong Kong enacted a new suite of crypto regulations that allowed for locally-licensed crypto firms to begin operations. From this point onwards, any firm with a valid license can service retail investors, allowing them to trade cryptocurrencies including Bitcoin (BTC) and Ether (ETH).

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