Attitudes toward crypto in Hong Kong have experienced a significant shift following the JPEX scandal, as revealed by a recent survey conducted by the School of Business and Management at the Hong Kong University of Science and Technology (HKUST). This shift in sentiment poses challenges to Hong Kong’s aspirations of becoming a global hub for the cryptocurrency industry.
“From September to October, 41% of respondents expressed a preference for not holding virtual assets, marking a 12% increase from earlier this year (April to May).” – South China Morning Post
The survey highlights a decline in trust and interest in cryptocurrencies among Hong Kong residents. In the wake of the JPEX scandal, only 20% of surveyed individuals in the current month indicated a desire to hold crypto in the future, representing a 5% drop from earlier this year.
The JPEX scandal, which involved a fraudulent platform, caused a significant loss of trust in the virtual asset sector. The JPEX cryptocurrency platform was at the center of a financial scandal affecting thousands of victims and amounting to HK$1.57 billion (US$200.7 million). Despite enforcement actions and the arrest of 28 individuals, the masterminds behind the scheme remain at large.
The decline in enthusiasm toward virtual assets can be attributed to the fallout from the JPEX scandal. The platform had enticed local retail investors with promises of exceptionally high yields but abruptly halted customer withdrawals following a public warning from Hong Kong’s securities watchdog. As a result, many retail customers lost their life savings.
Poor Understanding and Lack of Regulation
Virtual assets, including cryptocurrencies and non-fungible tokens (NFTs), had gained popularity in Hong Kong in recent years. However, a lack of understanding and poor investment decisions among many people has been a recurring issue.
“The latest HKUST surveys found that almost 70% of respondents, both in the current month and earlier this year, admitted to not understanding virtual assets ‘very well’ or ‘at all.'” – HKUST
A survey conducted by the Investor and Financial Education Council (IFEC) revealed that 8% of retail investors in Hong Kong bought virtual assets this year, a significant increase from the mere 1% reported in 2019. The survey also showed that nearly three-quarters of investors engaged in virtual assets for short-term gains, driven by a fear of missing out on investment trends.
However, overconfidence in judgment regarding virtual assets has been a recurring concern. The lack of regulation in the industry raises concerns among investors, as they fear falling victim to fraud by investment platforms.
“More than half of the respondents expressed concerns about the lack of regulation in the industry, fearing they could fall victim to fraud by investment platforms.” – HKUST
