The Hong Kong Monetary Authority (HKMA) has issued a stern warning to the public regarding cryptocurrency businesses that present themselves as banks and employ banking terminology. The central bank has raised concerns that such practices may be in violation of the region’s banking laws.
In an official press release, the HKMA emphasized that the use of certain banking terms in the cryptocurrency sector could potentially mislead the public into believing that these crypto firms are authorized banks operating within Hong Kong. It is important to note that, under Hong Kong’s banking regulations, only licensed institutions have the legal authority to conduct banking or deposit-taking operations.
The HKMA specifically pointed out that companies referring to themselves as “crypto banks,” “digital asset banks,” or “crypto asset banks,” and those claiming to offer banking services or accounts, may be infringing upon the law. Furthermore, the use of the term “bank” in a company’s name or descriptions is restricted to authorized institutions, and engaging in deposit-taking activities without the requisite license is also considered unlawful.
One critical aspect stressed by the HKMA is that cryptocurrency firms that do not hold banking licenses are not subject to its regulatory oversight. Consequently, any funds deposited in so-called “crypto banks” do not enjoy the protection provided by the region’s deposit protection scheme, leaving investors potentially vulnerable to losses.
Hong Kong has recently intensified its efforts to enforce licensing laws within the cryptocurrency industry. On September 15th, the Securities and Futures Commission (SFC) issued a warning against JPEX, a cryptocurrency exchange, for allegedly promoting its products and services in Hong Kong without obtaining the necessary license or even applying for one.
In response to the SFC’s warning, JPEX took drastic measures, including staff members mysteriously disappearing from its Token 2049 booth in Singapore and significantly raising withdrawal fees, possibly to deter users from retrieving their funds from the exchange. These actions underscore the growing scrutiny and regulatory pressure on cryptocurrency businesses operating in Hong Kong and the broader financial industry.