Hong Kong Authority Warns Against Crypto Entities Posing as Banks

The Hong Kong Monetary Authority (HKMA) recently warned the public about crypto companies using the terminology and descriptors typical of banks. On September 15, HKMA issued a statement highlighting its concerns about these crypto entities presenting themselves as “banks” and promoting their offerings as “deposits.”

HKMA clarified that the Hong Kong Banking Ordinance explicitly prohibits any unlicensed organizations from suggesting that they operate as banks in the region. Such misrepresentations are deemed illegal by the authorities.

Quoting from the official announcement by the HKMA, it was mentioned:

“The HKMA is aware of some crypto firms describing themselves using terms such as crypto bank, crypto asset bank, digital asset bank, digital bank, or digital trading bank, or claiming to offer banking services or banking accounts.”

The core issue lies in the potential confusion these terms may cause. The general public might mistakenly think these crypto companies are legitimate Hong Kong-based financial institutions.

Furthermore, there’s increased risk when these entities label customer funds as “deposits” and pitch “savings plans” as being “low risk” with “high return” opportunities.

As a backdrop to this, Hong Kong has recently been recognized as a leading “Crypto-Ready” nation. The HKMA’s warning is in line with the broader aim of safeguarding consumers. This initiative echoes a separate notice from the Securities and Futures Commission (SFC) which highlighted dubious activities by the JPEX crypto exchange.

It’s evident that as digital platforms continue to emerge and mirror services offered by conventional banks, there’s an increasing need for clear regulations and protective measures for consumers.

The HKMA was clear in its message, emphasizing that:

“Crypto firms which are not banks in Hong Kong are not supervised by the HKMA and funds placed with them are not protected by the Hong Kong Deposit Protection Scheme.”