The Hong Kong Monetary Authority (HKMA) has issued a stern warning to cryptocurrency-related companies employing misleading nomenclature, particularly those that present themselves as “banks” and their offerings as “deposits.” In a recent statement, the financial watchdog advised the public to exercise caution when engaging with such entities, emphasizing the potential risks associated with these deceptive labels.
The HKMA’s alert was prompted by its recent discovery of numerous crypto firms in Hong Kong that use titles such as “crypto bank,” “digital asset bank,” “crypto asset bank,” “digital bank,” or “digital trading bank.” According to regulators, these designations violate Hong Kong’s Banking Ordinance and could create a false impression that these crypto businesses are authorized banks in Hong Kong, capable of safeguarding individuals’ savings.
Authorized institutions only
The HKMA reiterated that, under the Banking Ordinance, only institutions that have obtained proper licenses from the HKMA are legally permitted to provide banking services in Hong Kong. Any unauthorized operations are considered illegal and subject to penalties.
The HKMA stated, “Other than authorized institutions, it is an offense for any person to use the word ‘bank’ in the name or description under which they carry on business, or make any representation that they are a bank or carrying on banking business in Hong Kong; and it is also an offense for any person to carry on a business of taking deposits in Hong Kong or invite members of the public to make any deposit.”
Securities and Futures Commission’s caution
This regulatory caution follows a recent warning from the Securities and Futures Commission (SFC) regarding the cryptocurrency exchange JPEX. The SFC declared that JPEX is an unauthorized entity and disclosed several suspicious practices on its official website. These practices included false descriptions claiming the firm was a licensed entity, adding to the growing concerns regarding misleading representations within the crypto industry.
The HKMA’s alert underscores the increasing need for regulatory oversight and clarity in the cryptocurrency sector. With the rapid growth of digital assets and crypto-related businesses, authorities worldwide are taking steps to protect consumers from potential scams and misleading practices. By enforcing legal standards and ensuring proper authorization for banking services, regulators aim to maintain the integrity and trustworthiness of Hong Kong’s financial system.
