Hong Kong Monetary Authority Warns Against Misleading Use of Banking Terms by Crypto Businesses
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Modified on: Mon, 18 Sep, 2023 at 12:16 AM
The Hong Kong Monetary Authority (HKMA) has issued a warning to crypto businesses that are using banking terminology and presenting themselves as banks, potentially violating the region's banking laws. The central bank highlighted that only licensed institutions are permitted to engage in banking or deposit-taking activities in Hong Kong. Firms describing themselves with terms like "crypto bank," "digital asset bank," or "crypto asset bank," or claiming to offer banking services, may be in violation of the law. The HKMA reminded the public that funds placed with these unlicensed "crypto banks" are not protected by the region's deposit protection scheme.
HKMA Issues Warning Against Crypto Firms Misusing Banking Terminology
The Hong Kong Monetary Authority (HKMA) has issued a warning to crypto businesses that are using banking terminology and presenting themselves as banks, raising concerns about potential violations of the region's banking laws. The central bank emphasized that only licensed financial institutions are authorized to conduct banking or deposit-taking activities in Hong Kong.
In a press release, the HKMA expressed concerns that the use of specific banking terms could be misleading to the public, giving the impression that these crypto firms are authorized banks in Hong Kong. The central bank pointed out that, under Hong Kong's banking laws, only licensed institutions are permitted to engage in such activities.
The HKMA cautioned the public to be vigilant of firms that describe themselves using terms like "crypto bank," "digital asset bank," or "crypto asset bank," or that claim to provide banking services or banking accounts. Using the word "bank" in a company's name or description is prohibited for individuals or businesses other than authorized institutions. Facilitating deposits without the necessary license is also considered a violation of the law.
Importantly, the HKMA reminded the public that crypto businesses that are not recognized as banks are not subject to its supervision. Consequently, funds placed with these so-called "crypto banks" are not protected by Hong Kong's deposit protection scheme.
This regulatory warning comes as Hong Kong authorities have been intensifying efforts to enforce licensing laws within the crypto industry. The Securities and Futures Commission (SFC) of Hong Kong recently issued a warning against a crypto exchange called JPEX, alleging that it had been promoting its products and services in the region without obtaining the required license or submitting an application for one.
In response to the SFC's warning, JPEX took steps to discourage users from withdrawing their funds, including raising withdrawal fees to a significant level. The regulatory environment in Hong Kong remains dynamic, with authorities taking measures to ensure compliance within the cryptocurrency sector and protect the interests of consumers and investors.
(ANA PAULA PEREIRA, CoinTelegraph, 2023)
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