The JPEX incident has exposed deep trust issues, and Hong Kong is reshaping a new paradigm for digital asset regulation.

A HKD 1.6 billion eyewash, a cross-border law enforcement pursuit, and a trap that is taking shape as a regulatory system—Hong Kong's digital asset market is undergoing a difficult journey from the collapse of trust to the reconstruction of the system.

In the courtroom of the Eastern District Court in Hong Kong, the atmosphere is tense. Internet celebrity Lin Zuo, Chen Yi, and seven other defendants in the JPEX case appear in court one after another. Lin Zuo gritted his teeth and showed signs of anxiety while listening to the charges. This is the largest cryptocurrency eyewash case in Hong Kong's history, which has resulted in 16 people being prosecuted, with the amount involved reaching 1.6 billion HKD and over 2,700 victims reporting cases.

The Chief Superintendent of the Police Commercial Crime Bureau, Wong Chan-yu, revealed that the JPEX case is extremely complex. After a lengthy investigation of massive amounts of data and transaction records, key evidence has been identified. The police have currently issued a red notice through Interpol for three fugitive core members and have initiated a global manhunt.

However, the outbreak of the JPEX case is not accidental; the cracks it exposes are precisely the gray areas that Hong Kong must confront in the process of institutionalizing digital assets. In the ruins of collapsed trust, regulators are rebuilding the scaffolding of order.

1. Trust Collapse: From Celebrity Endorsements to Withdrawal Traps

The collapse of trust always happens silently - it is not until the withdrawal button fails that investors realize that the so-called prosperity is just a carefully crafted illusion. For a time, JPEX's advertisements were everywhere in the streets and alleys of Hong Kong, from shopping malls to MTR stations, from buses to ice cream trucks, creating a false impression of reliability for the platform through ubiquitous marketing.

This beautifully packaged trading platform has numerous doubts. According to a statement from the Hong Kong Securities and Futures Commission in September 2023, JPEX claims to be “from Japan,” but the Japanese government clarified that it has never approved the operation of this platform. Even more shocking is that the platform claims to have partnered with Visa to launch a co-branded debit card, but Visa subsequently publicly denied this.

The JPEX case is not an isolated incident, but a comprehensive collapse of the trust mechanism in digital assets. The core of the virtual asset market is not price fluctuations, but the foundation of trust—when advertising endorsements and marketing rhetoric replace regulatory compliance and transparent operations, the collapse of the market is just a matter of time.

After the Hong Kong Securities and Futures Commission issued a warning, JPEX immediately restricted customer withdrawals and significantly raised withdrawal fees to an unacceptable level, resulting in a large amount of investors' funds being locked. This operational method is reminiscent of traditional traps, yet it is cloaked in the glamorous guise of blockchain technology.

Police investigations found that JPEX's operating model has obvious fraudulent characteristics. The platform attracts investors through endorsements from internet celebrities and stars, promising high returns, but in reality has constructed a typical Ponzi scheme—using the funds from new investors to pay the returns of old investors. Once the inflow of funds is insufficient, the entire system will collapse.

In the JPEX case, the Hong Kong police have for the first time invoked relevant provisions of the revised 2022 “Anti-Money Laundering and Counter-Terrorist Financing Ordinance” to bring charges, demonstrating the law enforcement's innovative legal capabilities in addressing new forms of financial crime. Among the 16 individuals charged, 6 are core members of JPEX, involved in crimes such as conspiracy to defraud and money laundering; 7 are individuals related to over-the-counter exchanges and KOLs; and 3 are puppet account holders.

II. Regulatory Awakening: From Individual Case Response to System Reconstruction

The JPEX case is like a deep-water bomb, exposing not only a fraud case but also deep fractures in the digital asset regulatory system. In the face of this crisis of trust, Hong Kong regulators are shifting from passive responses to active construction, trying to find a balance between protecting investors and promoting innovation.

The statement by the Secretary for Financial Services and the Treasury, Xu Zhengyu, reveals a shift in regulatory thinking: “The process of technological development can be ambiguous, and investors must remain vigilant at all times.” Behind this statement is the regulatory body's deep understanding of the characteristics of digital assets—traditional regulatory frameworks are difficult to fully adapt to the rapidly evolving financial innovations.

From the perspective of regulators, the significance of the JPEX case goes beyond combating illegal activities; it also serves as a “negative example” for institutional innovation. The regulatory challenge in Hong Kong lies not in the absence of systems, but in how these systems can keep pace with the speed of innovation—this is the deeper context in which Xu Zhengyu emphasizes that “regulation must keep up with time.”

After the JPEX incident, Hong Kong regulators have shown unprecedented determination. Xu Zhengyu revealed that authorities will comprehensively optimize the regulatory system from four directions: trading mechanisms, stablecoin regulation, asset custody, and digital asset traders. This systematic construction approach marks a new phase in the regulation of digital assets in Hong Kong.

In June 2025, the Financial Services and the Treasury Bureau, along with the Securities and Futures Commission, will commence a joint consultation to introduce a regulatory regime for virtual asset trading service and custodial service providers. The proposed regime will empower the Securities and Futures Commission to license and supervise relevant service providers, creating a complete digital asset ecosystem.

Ms. Liang Fengyi, Chief Executive Officer of the Securities and Futures Commission, pointed out: “The proposal to introduce a regulatory system for trading service and custody service providers will help build a digital asset market that is both safe and reliable, as well as vibrant.” This statement reflects the regulatory principle of Hong Kong regulators of “same business, same risk, same rules.”

3. Institutional Innovation: Hong Kong Path and International Perspective

In the global arena of digital asset regulation, Hong Kong is exploring a unique path. Unlike the United States, which prioritizes law enforcement with a “post-regulation” approach, Hong Kong is attempting to reshape the trust framework through a model that prioritizes systems and is guided by the market.

In the key area of stablecoins, Hong Kong has made substantial progress. On November 2025, Yu Cheng revealed that the Monetary Authority received stablecoin license applications from 36 institutions, which come from companies of different backgrounds, and licenses are expected to be issued early next year.

This progress is in line with the “Hong Kong Digital Asset Development Policy Declaration 2.0” issued by the Hong Kong SAR Government in June 2025. The declaration outlines the vision of the SAR Government to build a trustworthy and innovation-focused digital asset ecosystem, prioritizing risk management and investor protection, while also aiming to bring tangible benefits to the real economy and financial markets.

Across the globe, major financial markets have adopted different regulatory strategies for digital assets. Singapore tightened its advertising and endorsement system for virtual assets in 2024, and Hong Kong reinforced compliance requirements based on this; the European Union introduced the MiCA framework to provide unified regulatory rules for digital assets; the United States continued its enforcement-driven regulatory model.

Hong Kong's approach is unique - it neither simply replicates international experiences nor is it completely self-innovative, but rather a gradual reform based on fully absorbing global lessons. This thinking is reflected in its “LEAP” framework, which includes optimizing legal and regulatory aspects, expanding the variety of tokenized products, promoting application scenarios and cross-sector cooperation, and developing talent and partnerships.

The JPEX case highlights the importance of cross-border regulation of digital assets. The police issued a red notice through Interpol for three men believed to be key figures in the JPEX case, reflecting Hong Kong's determination for international cooperation in combating cross-border virtual asset crimes.

At the same time, Hong Kong's regulatory technology is continuously upgrading. Police Commissioner Chow Man-hung stated that the Hong Kong police have established an electronic system for analyzing bank documents related to the flow of funds in bank accounts, and are jointly developing a one-stop virtual asset analysis tool with local universities to target fraudsters who use digital assets for collecting and laundering scam funds. These advancements in technology signify the modernization process of Hong Kong's regulatory capabilities in the field of digital assets.

4. Trust Rebuilding: From Regulatory Compliance to Market Ecology

The JPEX case exposes not just the moral failures of individual platforms, but the “trust vacuum” in the digital asset market—when regulation lags behind innovation and investor education lags behind market enthusiasm, trust becomes the most scarce resource. Today, Hong Kong is working hard to fill this vacuum.

Xu Zhengyu emphasized that investors need to know what services or products they are buying. They should be cautious when it seems “too good to be true.” The authorities will continue to strengthen regulatory and enforcement efforts. This approach, which emphasizes regulatory responsibility while valuing investor education, reflects the concept of multi-layered risk prevention.

After the JPEX incident, the Hong Kong Securities and Futures Commission significantly strengthened investor education efforts, using various channels to raise public awareness about the risks of digital asset investments and enhance investors' ability to discern and their risk awareness. This “regulation + education” dual-track model is a crucial part of rebuilding market trust.

At the same time, the digital asset industry in Hong Kong is also undergoing self-regulation. Compliant trading platforms are strengthening internal risk control, enhancing information transparency, and attempting to rebuild market confidence by distancing themselves from JPEX. Some platforms have also voluntarily formed industry associations to establish industry standards and promote healthy competition.

This industry-driven compliance effort resonates with the institutional framework established by regulatory bodies, jointly building the trust foundation of the digital asset market. When market participants realize that short-term interests are unsustainable and long-term development needs to be built on a foundation of trust, the entire industry can mature.

Hong Kong's exploration of digital asset regulation is not only related to the development of the local market but also holds global significance. As an international financial center, Hong Kong's successful experiences can serve as a reference for other markets, while its lessons from failures can help newcomers avoid detours.

The Financial Secretary of the Hong Kong Special Administrative Region, Paul Chan, stated in the “Hong Kong Digital Asset Development Policy Declaration 2.0”: “Digital assets are an important and highly promising part of financial technology. Through blockchain technology, they empower more efficient and lower-cost financial transactions, making financial services more inclusive and accessible.” The realization of this vision relies on a solid foundation of trust.

On the ruins of collapsed trust, Hong Kong is rebuilding the framework of order for digital assets. The JPEX case is like a mirror, reflecting the greed and blindness of the market, as well as the lag and inadequacy of regulation. However, the crisis also breeds opportunity—when eyewash is exposed, when criminals are held accountable, and when the system is improved, the foundation of trust is being rebuilt brick by brick.

The rebuilding of trust is not just the task of regulators, but a collective practice for an international financial city. From the painful lesson of 1.6 billion Hong Kong dollars to the regulatory optimizations in four major directions, Hong Kong is undergoing a profound institutional transformation in the digital asset field. This road is full of challenges, but as the Secretary for Financial Services and the Treasury, Christopher Hui, said: “The market is constantly evolving, and any service or product in the process will inevitably have potential bad elements, and relevant regulatory bodies must keep pace with time.”

In this race of trust and innovation, Hong Kong is seeking its own rhythm. And when regulation, the market, and investors work together, the future of digital assets may be both vibrant and safe.

Source of some information:

· “JPEX Case | Xu Zhengyu: Any service product has potential bad elements, regulation must keep pace with the times”

· “The first batch of 8 individuals in the JPEX case has been handed over to the court, and the Hong Kong government stated that it will optimize the regulation of virtual assets.”

· Hong Kong Announces New Digital Asset Development Policy Declaration

Author: Liang Yu Editorial Review: Zhao Yidan