The Hong Kong Monetary Authority (HKMA) has issued a warning to cryptocurrency firms, cautioning them against falsely describing themselves as banks or characterizing their products as "deposits." Such misleading descriptions could mislead the public into believing these crypto firms are trustworthy financial institutions. The HKMA clarified that only licensed banks, restricted license banks, and authorized institutions are permitted to engage in banking or deposit-taking activities in Hong Kong under the Banking Ordinance. Crypto firms claiming to offer banking services are in contravention of these regulations and could face legal consequences.
Hong Kong Regulator Cracks Down on Crypto Firms Misrepresenting as Banks
The Hong Kong Monetary Authority (HKMA) has issued a stern warning to cryptocurrency firms operating in the region, urging them to refrain from misleading practices where they falsely present themselves as banks or label their products as "deposits." According to the financial services regulator, these deceptive descriptions may mislead the public into believing that these crypto entities are trustworthy financial institutions, potentially putting consumers at risk.
The HKMA clarified that only licensed banks, restricted licence banks, and authorized institutions, collectively referred to as "authorized institutions," are legally permitted to conduct banking or deposit-taking business within the jurisdiction of Hong Kong under the Banking Ordinance. Any entities operating outside these parameters and using terms commonly associated with banks to solicit clients are in violation of Hong Kong's financial regulations.
In its official statement released on September 15, the HKMA emphasized its awareness of certain crypto businesses portraying themselves as "crypto asset banks" and "digital banks." The regulator also cautioned against crypto firms claiming to provide banking services or banking accounts. Such practices not only undermine the credibility of legitimate financial institutions but also pose potential risks to unsuspecting clients.
The HKMA further highlighted that it does not exercise supervision over cryptocurrency firms and reiterated that funds entrusted to these entities are not protected by the Hong Kong Deposit Protection Scheme. To ensure clarity regarding the status of deposit-taking firms, the regulator advised Hong Kong residents to consult the register of authorized institutions on the HKMA's official website.
The message from the HKMA is clear: deceptive representations by crypto firms, especially when using terms associated with traditional banks, will not be tolerated. The regulator's vigilance underscores its commitment to maintaining the integrity of the financial sector and safeguarding the interests of consumers in Hong Kong's evolving digital landscape.
(Terence Zimwara, Bitcoin News, 2023)