The Hong Kong Monetary Authority (HKMA) has announced a public advisory warning to cryptocurrency firms, cautioning them against presenting themselves as banks and the misuse of banking terminology. The regulatory body emphasised that misrepresentations could violate the region’s bank laws.
On September 15th 2023, in a press release, the HKMA announced that using specific banking terms may be misleading the public, causing users to assume that the crypto firms are authorised bans in Hong Kong. The central bank mentioned that under the region’s banking laws, only licensed institutions are permitted to carry out banking or deposit-taking business in the country.
Overview
The central bank highlighted that firms that describe themselves with words such as crypto bank, digital asset bank and crypto asset bank or claim to be offering banking services or banking accounts may be breaking the law. The HKMA also emphasised that other than authorised institutions, it’s unlawful for businesses or persons to use the word bank in the name or descriptions of their firms. Moreover, facilitating the taking of deposits without the proper licence violates the law.
The watchdog said, “Only licensed banks, restricted licence banks, and deposit-taking companies (authorised institutions), to which the HKMA has granted a licence, can carry out banking or deposit-taking business in Hong Kong”. Additionally, some crypto firms promote saving plans as low risk with high returns, misleading the public into believing that these firms are authorised banks in Hong Kong where they can securely save their funds.
The HKMA warned firms describing themselves and their products as deposits in Hong Kong as infringing the Banking Ordinance. Crypto firms not supervised by the HKMA are not recognised as banks in Hong Kong, and the Hong Kong Deposit Protection Scheme does not shield funds placed with these companies.
The HKMA urged the public to exercise caution. Individuals were advised to consult the register of authorised institutions on the HKMA’s website if there are uncertainties regarding an entity claiming to be a bank or seeking deposits in Hong Kong. If doubts persist, the public was advised to contact the HKMA’s Public Enquiry Service at 2878 8222. Section 97 of the Banking Ordinance states that only a bank or a central bank can use the term bank or its derivatives in its business name in Hong Kong without written consent from the HKMA.
According to sections 11 and 12 of the Banking Ordinance, only an entity with a valid banking licence or recognised as an authorised institution can engage in banking or deposit-taking activities in Hong Kong. According to section 92 of the Banking Ordinance, only an official institution can issue an advertisement inviting the public to deposit certain exceptions.
Hong Kong’s Crypto Timeline
Recently, Hong Kong has been cracking down on violators of its licensing laws. Experts at Bitai method Official mentioned that on September 13 2023, the region’s Securities and Futures Commission (SFC) issued a warning against JPEX, a crypto trading platform (VAPT), for allegedly promoting its products and services in Hong Kong without securing a licence or applying for one. The SFC highlighted that JPEX marketed itself as a licensed and recognised platform on its website despite being unregulated.
The SFC mentioned that it notified relevant opinion leaders and over-the-counter stores of its suspicions about the exchange and asked them to stop promoting its services. Following the SFC’s warnings, reports of JPEX increasing its withdrawal fees up to 999 USDT began circulating online. The move discouraged users from withdrawing their funds from the exchange. The exchange’s staff seemingly disappeared from its Token 2049 booth in Singapore after the warning from the Hong Kong regulator.
On August 17th 2023, Hong Kong mentioned that the region started promoting the development of Web3 and aimed at becoming the leading crypto hub. Securities regulators had started regulating the crypto space and awarding licences for retail crypto trading. On June 30 2023, Hong Kong’s government announced that it established a task force in charge of ethically promoting Web3 development in the region. The team included 11 key government officials and 15 industry participants. Hong Kong continues to cement its presence as an international crypto hub.
In May 2023, retailers were permitted to invest in digital currencies. According to the latest reports, Hong Kong topped the chart as the most crypto-ready hub for the second successive year. The hierarchy considers factors like accessibility to crypto ATMs, a decisive regulatory regime, a vibrant start-up culture and an equitable taxation framework.
The move made by Hong Kong shows how determined they are about their citizens and the message that crypto firms portray. The Hong Kong Monetary Authority reminded the public to be cautious about cryptocurrencies. Also, it informed crypto firms to desist from presenting themselves as banks and misusing bank terminologies.
