Cryptocurrency exchange JPEX has encountered operational challenges stemming from a liquidity shortage caused by what it describes as “malicious” actions by third-party market makers. These issues have prompted the exchange to take significant measures to address the situation and protect user interests. However, JPEX’s problems have been exacerbated by a warning from the Hong Kong Securities and Exchange Commission (SFC) regarding its regulatory compliance.
Liquidity Shortage and Delisting
In a statement dated September 17, JPEX announced the suspension of all transactions on its Earn trading interface, effective September 18. The platform attributes this move to a liquidity shortage directly linked to actions taken by third-party market makers. The liquidity shortage has led to increased daily operating expenses and operational challenges for JPEX.
To safeguard user interests and restore liquidity, JPEX is actively negotiating with these third-party market makers to resolve the situation as swiftly as possible. The exchange promises to recover liquidity and gradually adjust withdrawal fees back to normal levels.
In response to the liquidity crisis, JPEX has outlined plans to restructure its platform. The exchange intends to gather input from users and internal staff before subjecting the proposed changes to a vote. Specific details of these restructuring efforts will only be disclosed after negotiations with third-party market makers have been concluded to prevent potential conflicts.
SFC Warning and Regulatory Concerns
JPEX’s troubles were compounded by a warning from the Hong Kong Securities and Exchange Commission (SFC). The SFC alleges that JPEX has been actively promoting its services to the Hong Kong public without holding a Virtual Asset Trading Platform (VATP) license and failing to initiate the application process for one.
The SFC identified several purported inaccuracies on JPEX’s website, including misleading claims of having obtained licenses from overseas regulators for VATP operations. The SFC clarified that JPEX had not received approval for cryptocurrency trading as suggested.
Additional Caution from the HKMA
The Hong Kong Monetary Authority (HKMA) extended its cautionary message to the crypto community, emphasizing that crypto companies should refrain from identifying themselves as banks and using banking-related content in their marketing materials. The HKMA clarified that the term “bank” can only be used legally by licensed banks, restricted license banks, and deposit-taking companies.
JPEX’s liquidity shortage, allegedly caused by third-party market makers, has prompted the exchange to suspend transactions temporarily and embark on a restructuring process. The situation has been exacerbated by regulatory concerns raised by the Hong Kong SFC and an extended caution from the HKMA regarding the use of the term “bank” in the crypto industry. JPEX faces challenges on multiple fronts, emphasizing the importance of regulatory compliance and the need for exchanges to maintain sufficient liquidity to protect their users.