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Op-ed: JPEX – A crypto scandal that shakes Hong Kong’s reputation

Op-ed: JPEX – A crypto scandal that shakes Hong Kong’s reputation

Hong Kong, a global financial hub and a gateway to China, has been rocked by a massive crypto scandal involving JPEX. This Dubai-based cryptocurrency exchange allegedly defrauded thousands of investors of more than $160 million. The case has exposed the regulatory loopholes, the lack of investor protection in Hong Kong’s nascent crypto industry, and the risks of relying on social media influencers to promote unlicensed platforms.

JPEX, which stands for Japan Exchange, claimed to be the world’s first crypto exchange offering its users dividends. It also boasted of partnering with major institutions such as HSBC, Standard Chartered, and Alibaba. It lured investors with promises of high returns and low fees and used aggressive marketing strategies such as billboards, online ads, and influencer endorsements.

Among the influencers who promoted JPEX were Joseph Lam, a barrister turned insurance salesman who called himself Hong Kong’s “Trolling King”, and Chan Yee, a YouTube personality with 200,000 subscribers. They showed their followers how Bitcoin profits could help them buy houses and cars and encouraged them to sign up for JPEX using their referral codes.

The SFC revealed that it had issued a warning letter to JPEX in June 2023, asking it to cease its activities in Hong Kong or apply for a license. However, JPEX ignored the letter and continued to operate illegally. The SFC also said it had no jurisdiction over JPEX’s operations in Dubai, where it was registered.

The Hong Kong police launched an investigation into JPEX after receiving complaints from more than 2,000 investors claiming to have lost HK$1.3 billion ($166 million). The police arrested 11 people, including Lam and Chan, on suspicion of fraud, money laundering, and conspiracy to defraud. The police also seized computers, mobile phones, bank cards, and documents from the suspects’ premises.

The case has sparked public outrage and raised questions about Hong Kong’s regulatory framework for crypto assets. Hong Kong has been trying to position itself as a global hub for innovation and technology, especially after introducing the national security law in 2020 that eroded its autonomy and freedoms. In November 2020, the SFC announced a new licensing regime for virtual asset trading platforms to enhance investor protection and combat money laundering.

The regime only took effect in June 2023, leaving a gap of more than six months for unregulated platforms like JPEX. Moreover, the regime only covers platforms that trade at least one security token, a type of crypto asset representing ownership or rights in an underlying asset or business. Platforms that trade only non-security tokens, such as Bitcoin or Ethereum, are not required to obtain a license from the SFC.

This means there is still a large segment of the crypto market that is unregulated and unsupervised in Hong Kong. According to CoinMarketCap, more than 11,000 crypto assets are in circulation, with a total market capitalization of over $2 trillion. Many of these assets are highly volatile and speculative; some may be fraudulent or illegal.

The JPEX case also highlights the dangers of trusting social media influencers who endorse crypto products or platforms without proper disclosure or due diligence. Influencers may have ulterior motives or conflicts of interest when they promote certain platforms or tokens. They may also lack the expertise or credibility to provide accurate or reliable information about the risks and rewards of investing in crypto assets.

Investors should be wary of any platform or product that promises unrealistic returns or guarantees without disclosing the risks involved. They should also do their own research and verify the credentials and reputation of any platform or product they intend to use. They should also check whether the platform or product is licensed or regulated by any authority in Hong Kong or elsewhere.

The JPEX case has also drawn attention to the role of Dubai as a crypto haven for shady operators. Dubai, part of the United Arab Emirates (UAE), has been attracting crypto businesses with its low taxes, lax regulations, and friendly attitude.

Dubai has no specific law or authority to regulate crypto assets and does not require crypto platforms to obtain a license or register with any agency. Dubai also does not have an extradition treaty with Hong Kong, making it difficult for the authorities to pursue JPEX or its founders.

However, Dubai’s crypto-friendly stance may come at a cost for its reputation and security. Dubai may become a magnet for scammers, hackers, and terrorists who use crypto assets to evade sanctions, launder money, or finance illicit activities.

Dubai may also face pressure from other countries or international organizations to tighten its crypto industry oversight and compliance. Dubai may have to balance its ambition to become a global leader in innovation and technology with its responsibility to prevent and combat financial crimes and risks.

The JPEX case is not the first nor the last crypto scandal that Hong Kong will face. This is not only a wake-up call for investors but also for regulators and policymakers. As the crypto industry grows and evolves, new challenges and opportunities will emerge for Hong Kong and its stakeholders. Hong Kong needs to learn from the JPEX case and take proactive and preventive measures to safeguard its interests and values.

Hong Kong needs to enhance its regulatory framework, enforcement of the crypto industry, and its education and awareness campaigns for the public. Hong Kong must cooperate and coordinate with other jurisdictions and agencies to combat cross-border crypto crimes and risks.

The JPEX case is a crypto scandal that shakes Hong Kong’s reputation as a global financial hub and a gateway to China. It exposes the regulatory loopholes and the lack of investor protection in Hong Kong’s crypto industry, as well as the risks of relying on social media influencers to promote unlicensed platforms.

Hong Kong needs to strengthen its oversight and enforcement of the crypto industry and its education and awareness campaigns for the public. Hong Kong also needs to balance fostering and regulating the crypto industry and protecting and empowering its investors. Only then can Hong Kong maintain its edge and competitiveness in the global arena.

Source: https://cryptoslate.com/op-ed-jpex-a-crypto-scandal-that-shakes-hong-kongs-reputation/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Op-ed: Binance’s reputation at risk as CFTC allegations raise concerns

Op-ed: Binance’s reputation at risk as CFTC allegations raise concerns

The U.S. Commodity Futures Trading Commission (CFTC) has sued Binance, the world’s largest cryptocurrency exchange, and its CEO, Changpeng Zhao (CZ), for allegedly violating federal law by allowing Americans to trade crypto derivatives on its platform.

The CFTC has been investigating Binance since 2021 on allegations that the exchange allowed U.S. residents to use its platform to buy and sell crypto derivatives, which require registration with the CFTC under current laws. The lawsuit alleges that Binance solicited U.S. users for millions in revenue, violating federal law. CFTC has also sued Binance for operating without being registered with the agency and without proper know-your-customer procedures.

The lawsuit also claims that Binance traded against its customers, taking advantage of inside information and manipulating markets to increase profits. Additionally, Binance’s former chief compliance officer, Samuel Lim, was charged with aiding and abetting the company’s violations. This is a severe breach of trust if this is true. The accusation of Binance trading against its users is particularly troubling. If true, this would be a betrayal of trust and a violation of the principles of fair trading.

Impact on Binance

As a cryptocurrency exchange, Binance should be a neutral platform that facilitates trading between buyers and sellers, not one that takes advantage of its users. If found guilty by the CFTC, it could face significant penalties and consequences. The CFTC can impose fines, seek injunctions, and even ban individuals or companies from participating in commodity markets. Binance could also face civil lawsuits from affected users or investors.

Additionally, Binance’s reputation could be severely impacted if found guilty of the CFTC’s charges. Trust is essential in the cryptocurrency market, and if Binance is seen as a bad actor that trades against its users, it could result in a loss of confidence from its clients and investors. It could affect Binance’s ability to operate in the U.S. and other regulated markets, limiting its growth potential.

Impact on industry

From a broader perspective, it could harm the entire cryptocurrency industry. Binance is currently the world’s largest cryptocurrency exchange and plays a significant role in the market. A loss of confidence in Binance could lead to a decrease in overall market trust and investment. It could increase regulatory scrutiny and stricter regulations for other cryptocurrency exchanges.

Rostin Behnam, CFTC Chairman, said in a statement:

“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law,”

If I am not wrong, this is the first time CFTC has gone against a crypto exchange. The allegations by the CFTC are not to be taken lightly, and Binance should address them with transparency and accountability. It is vital to remember that these are allegations, and Binance has not been found guilty of wrongdoing.

Therefore, we should reserve judgment until all the facts have been presented in court. The consequences of being found guilty by the CFTC could be severe for Binance and its operations. It remains to be seen what the outcome of the lawsuit will be, and Binance has denied any wrongdoing and vowed to fight the charges.

It is also important to note that Binance has been scrutinized by various regulators worldwide. This is not the first time the exchange has faced accusations of regulatory violations. This raises concerns about the exchange’s compliance procedures and willingness to follow regulatory requirements.

Binance has responded to the lawsuit, stating that its priority is to continue protecting its users while working with regulators to ensure compliance. Binance has denied the allegations, stating that they have always complied with U.S. regulations and that the CFTC’s claims are without merit.

CZ had also publicly clarified on his blog:

“We are collaborative with regulators and government agencies worldwide. While we are not perfect, we hold ourselves to a high standard, often higher than what existing regulations require. And above all, we believe in doing the right thing by our users at all times. In this journey towards freedom of money, we do not expect everything to be easy. We do not shy away from challenges.”

It remains to be seen how the case will play out. Still, the CFTC is taking a strong stance on regulating cryptocurrency trading — companies like Binance must ensure they comply with all relevant laws and regulations to avoid similar legal action in the future.

The outcome of the lawsuit remains to be seen, but companies like Binance must comply with all relevant laws and regulations to avoid similar legal action in the future. Ultimately, the importance of regulatory compliance and transparency cannot be overstated. Binance’s ability to clear its name and move forward in a transparent and accountable manner will be crucial for the entire industry’s health and growth.

 

Source: https://cryptoslate.com/binance-reputation-at-risk-as-cftc-allegations-raise-concerns/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Op-ed: What can we see in web4 that we’re missing in web3?

Op-ed: What can we see in web4 that we’re missing in web3?

The more I speak and advise on crypto and blockchain matters, the more I think there is a gap between what decentralization is and reality. I do not doubt the feasibility of decentralization; I am just not sure if the current version of Web3 is decentralized enough. Maybe we are what everyone is saying, “we are merely in Web 2.5.”

Let’s begin.

WWW

WWW stands for World Wide Web. It is a system of interconnected documents and other resources linked by hyperlinks and URLs. The World Wide Web is a way to access information over the internet; it is not the internet itself.

It was created by Sir Tim Berners-Lee in 1989 while working at CERN (the European Organization for Nuclear Research) in Switzerland. The World Wide Web is built on the internet, allowing users to access and share information through various platforms, such as web browsers, mobile apps, and other software.

It is based on HTTP (Hypertext Transfer Protocol) and HTML (Hypertext Markup Language), which allows for creating documents containing text, images, videos, and other multimedia content. The World Wide Web is constantly evolving, and new technologies are being developed to improve user experience, security, and accessibility.

Web1

Web 1.0 refers to the first generation of the World Wide Web, primarily focused on providing static, read-only content to users. This phase of the web began in the 1990s and lasted until around the early 2000s.

Web 1.0 websites were typically simple, text-based pages with limited graphics and few interactive features. Individuals or organizations created and maintained them and were primarily used for sharing information, such as personal profiles, news articles, and research papers. Navigation was often limited to simple text links, and no search engines could help users find the information they needed.

Web 1.0 was characterized by its lack of interactivity and user-generated content. Users were mainly passive information consumers and could not interact with the web pages, leave comments, submit forms, upload files, and so on.

Web 1.0 was also limited in terms of accessibility, as many users were still using slow internet connections and older browsers that could not handle more advanced web technologies. As a result, web pages were often simple and limited in design.

In summary, Web 1.0 was the first phase of the World Wide Web. It was a time when the internet was still young, and the web was mainly used to share information, but with limited interactivity and user-generated content.

Web2

Web 2.0 refers to the second generation of the World Wide Web, which emerged in the early 2000s. It is characterized by the emergence of user-generated content, social media, and the ability for users to interact and collaborate online.

Web 2.0 technologies include social networking sites, blogs, wikis, and video-sharing sites, which allow users to create and share their content, rather than simply consuming content created by others. These technologies also allow for greater collaboration and communication among users, increased accessibility, and the ability to share and access information from various devices.

Web 2.0 sites are more dynamic and interactive than their Web 1.0 counterparts. They include features such as comments, ratings, and the ability to share and promote content across multiple platforms. They also use advanced technologies such as AJAX, which allows for more responsive and interactive interfaces, and rich media, such as videos and images.

Web 2.0 also brought the concept of “crowdsourcing,” which was the idea of leveraging the collective knowledge of the internet to create and improve content.

In summary, Web 2.0 is the second generation of the World Wide Web, it emerged in the early 2000s, and it’s characterized by the emergence of user-generated content, social media and the ability for users to interact and collaborate online. Web 2.0 sites are more dynamic, interactive, and collaborative than their Web 1.0 counterparts.

Web3

Web3, also known as Web 3.0, is the next evolution of the World Wide Web, characterized by the use of decentralized technologies, such as blockchain and smart contracts, to enable new forms of online interaction and commerce.

Unlike the current web, which is primarily controlled by centralized entities such as corporations and governments, the vision for web3 is to create a decentralized, open, and transparent network where users have more control over their data and online interactions. This includes using decentralized apps (dApps) and interacting with decentralized finance (DeFi) platforms, among other things.

Web4

Web4 is not a widely used term nor a consensus definition, so it may refer to different things depending on the context. However, some people use the term “Web4” to refer to the next generation of the World Wide Web, which would be even more decentralized and more focused on artificial intelligence, the semantic web, and the internet of things, among other things.

It would be characterized by more dynamic, autonomous, and interconnected systems that can learn from data, communicate with each other and adapt to changing environments. This would allow for more dynamic and adaptable systems that can learn from data and improve over time.

Some of the advantages of a more decentralized web include the following:

  1. Greater security and privacy, as users have more control over their data and online interactions
  2. More open and transparent systems, as there is no central point of control or failure
  3. Greater resilience and robustness, as the network can continue to function even if parts of it fail
  4. More innovation and competition, as there are fewer barriers to entry for new players

Web4 is seen as the next evolution of the World Wide Web, building upon the decentralized technologies of Web3. In Web4, the user experience is streamlined and frictionless, with the underlying technical details abstracted away. This means that users won’t need to worry about the specific blockchain being used, the intricacies of ZK-Rollups, or setting the correct gas limit for transactions. The gas wars and transaction fees of the current web3 will be a thing of the past.

Moreover, Web4 has the potential to create a circular crypto-economy that transcends physical and digital boundaries, making the need for fiat on and off ramps obsolete. This would be a significant disruption in the current financial system.

There are other interpretations of what Web4 could be, such as the “symbiotic web,” which refers to a symbiotic relationship between humans and machines, possibly even utilizing direct brain-machine interfaces.

Overall, the transition from Web1 to Web2, and now from Web3 to Web4, is similar in that it is a gradual process that opens new doors and invites more people to participate. While Web3 is still in its early stages and considered experimental, Web4 is expected to be more accessible and user-friendly, making it more widely adopted by the general public.

Where are the opportunities?

Web 4.0 offers a wealth of possibilities for companies and individuals. The symbiotic web will create more personalized experiences, allowing businesses to understand their customers better and provide tailored content.

AI-powered automation will improve efficiency, speed up time to market, and lower costs, giving businesses a competitive edge and better customer service.

The combination of hardware, software, and data will enable the development of new products and services, such as connected devices interacting with users and gathering data for personalization.

Web 4.0 also creates new revenue streams using data collected, like targeted advertising or subscription services.

Additionally, VR and AR applications will allow for new ways for businesses to engage with customers, for example, creating an AR application that allows customers to interact with products in a 3D space.

I will elaborate on this further below.

In summary, what do I see in Web4?

1) Industry 4.0 full automation

Industry 4.0 full automation uses advanced technologies such as IoT, AI, robotics, and digital twins to automate industrial processes fully. This results in increased efficiency, reduced costs, and improved product quality, leading to a fully autonomous and connected smart factory. The concept of Industry 4.0 is focused on creating a highly automated and digitized production environment. To be fully autonomous, web4 adds a layer of trust.

2) Decentralised sustainable metaverse + AR + VR

Combining a decentralized sustainable metaverse, AR, VR, and Web4 technologies creates a new dimension of the internet where users can experience a fully immersive and interactive virtual world. The decentralized aspect ensures that users have control over their data, and the virtual world operates sustainably.

AR and VR technologies enhance the experience by allowing users to interact with the virtual world more realistically and engagingly. Web4, also known as the Semantic Web, provides a decentralized and intelligent web infrastructure, enabling the metaverse to function seamlessly and intelligently. Together, these technologies create a new and exciting virtual experience accessible to many users.

3) AI making steps into the decentralized realm

AI is making steps into the decentralized realm with Web4 by enabling the creation of decentralized AI systems that operate on a peer-to-peer network. This combination of AI and Web4 technology allows for the creation of decentralized and autonomous systems that can perform complex tasks without a central authority.

4) Real decentralized apps and economies

This allows for creation of new business models and economic opportunities where transactions are secure, transparent, and tamper-proof. With Web4, dApps can be built and deployed on a decentralized network, providing users with greater control over their data and the ability to interact with the dApp in a secure and decentralized manner. This integration of Web4 in the decentralized app and economy development has the potential to create new and exciting opportunities for businesses and consumers alike.

5) Real power back to the users

This was briefly mentioned above. Web4 technology aims to give real power back to users by creating a decentralized and secure network where users have control over their data. With Web4, applications can be built and deployed on a decentralized network, allowing users to interact with the application in a secure and decentralized manner. This eliminates the need for a central authority, giving users greater control and autonomy over their data and interactions.

Additionally, the decentralized aspect of Web4 enhances the security and privacy of user data, reducing the risk of data breaches and providing users with greater control over their personal information. By giving power back to users, Web4 has the potential to revolutionize the way we interact with technology and the internet.

Web5 and Jack

In 2022, Jack Dorsey, the former CEO of Twitter, emerged as a leading figure in the development of Web5. He shared his vision for the next generation of the internet at the Consensus crypto and blockchain conference. Dorsey’s team at TBD, the Bitcoin-focused division of his fintech company Block (formerly known as Square), supports him in this endeavor.

According to Dorsey, Web5 is a solution to his issues with Web3, particularly his belief that it will never fully achieve decentralization.

“You don’t own ‘Web3.’ The [venture capitalists] and their [limited partners] do,” Dorsey said in a tweet, referring to the billions being poured into Web3. “It will never escape their incentives. It’s ultimately a centralized entity with a different label.”

“Know what you’re getting into,” he warned.

I do agree with Jack on this. The current practitioners often say that we are still in web2.5 is the same. It is not because we are not ready. We did not start this whole web3 era in the right foot and with the right decentralization model.

Ending note

Yes, it’s important to note that true decentralization is a core principle of a decentralized economy. This means that no central authority or intermediary is controlling or managing the network or its transactions. I have repeated this many times in my article. Instead, power and control is distributed among the network’s participants, and decisions are made through consensus mechanisms such as voting or proof of work.

Decentralization ensures that the network is resistant to censorship, fraud, and other malicious activities and that its users have complete control over their assets. While this is still in an ideation stage and frankly somewhat idealistic, perhaps Web4 is the chance for us to redefine decentralization, reform and improve decentralization, and revalue the true meaning behind decentralization. I will speak at the TMRW Conference in Dubai from 8-10 February 2023 on Web4. I hope to take this chance to speak to all the tech experts at the venue too.

 

Source: https://cryptoslate.com/op-ed-what-can-we-see-in-web4-that-were-missing-in-web3/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j