A ferry boat sails across the Victoria Harbour on September 7, 2023. (SHAMIM ASHRAF / CHINA DAILY)

Forty-one percent of Hong Kong residents do not want to hold virtual assets, up 12 percentage points from the previous survey conducted between April and May, with the collapse of unlicensed crypto exchange JPEX having fueled accusations that the industry is rife with fraud and Ponzi schemes, according to the latest survey conducted by the School of Business and Management of the Hong Kong University of Science and Technology (HKUST).

The survey found that around 20 percent of respondents would like to hold virtual assets in the future, down by 5 percentage points from the previous survey, which was conducted months before the JPEX incident.

The survey also revealed that about 84 percent of respondents have heard of virtual assets before, but only around 27 percent of those respondents hold or have previously held virtual assets

The alleged fraud case concerning the beleaguered crypto exchange platform involves losses of HK$1.56 billion ($199 million). More than 2,300 users have filed complaints about JPEX, while 28 people, including some popular influencers, have been arrested so far.

A total of 5,700 people aged 18 or above responded to HKUST's first four-week-long survey, conducted from April 24 to May 23. To reassess residents’ views after the JPEX scandal, a second-phase survey was launched on Sept 28, with 2,200 people responding as of Oct 5.

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Allen Huang, associate dean of the HKUST Business School, said the recent JPEX debacle has placed virtual assets and regulation issues under public scrutiny and led to a more conservative investment appetite.

“Virtual assets are an emerging asset class with potential to spur innovation and growth in the financial sector. Market incidents in Hong Kong and overseas show that they also entail significant risks and challenges for investors and regulators,” Huang said.

The survey also revealed that about 84 percent of respondents have heard of virtual assets before, but only around 27 percent of those respondents hold or have previously held virtual assets.

The April-May survey, meanwhile, found that more than 80 percent of respondents wanting to invest in virtual assets said they would invest no more than HK$50,000 in them.

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The JPEX fraud scandal has made the public more aware of virtual asset regulations. In the second-phase survey, 57 percent of respondents said they were aware that the regulatory authorities in Hong Kong require virtual asset providers, including crypto exchanges, to get a license to operate in Hong Kong. This represents an increase of 15 percentage points compared with the previous survey.

However, the findings also showed there is a common misconception among the general public, with over half of respondents believing that virtual assets traded on Hong Kong-licensed exchanges are approved by regulators.

Since June, Hong Kong has required virtual asset trading platforms to be licensed by the Securities and Futures Commission. But the products offered by exchanges are subject to due diligence conducted by the relevant exchange establishment committee for registry.

“We hope that the findings in the survey can offer industry stakeholders more perspectives on the development of a robust virtual asset sector in Hong Kong,” Huang said.

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“As virtual assets become increasingly a part of the digital economy, more educational initiatives are needed to enhance public understanding and awareness of the risks and potentials of this emerging field,” he added.