On September 10th, the Hong Kong Monetary Authority (HKMA) issued a stern warning to cryptocurrency firms that present themselves as banks, declaring such actions to be in direct violation of the region’s Banking Ordinance. The HKMA emphasized that such misrepresentations could potentially mislead the public into believing these crypto firms possess the same level of trust and security as traditional financial institutions.
False Descriptions Breach Banking Ordinance
The HKMA unequivocally instructed cryptocurrency companies to cease falsely labeling themselves as banks and to refrain from characterizing their products as “deposits.” According to the financial services regulator in Hong Kong, engaging in such deceptive practices constitutes a breach of the territory’s Banking Ordinance.
In an official statement released on September 15th, the HKMA expressed awareness of certain cryptocurrency businesses’ attempts to portray or describe themselves as crypto asset banks and digital banks. Additionally, the regulator issued a stern warning to crypto firms claiming to provide banking services or banking accounts. The HKMA underscored that these descriptions have the potential to mislead the public into believing these crypto firms are trustworthy financial institutions.
HKMA’s Limited Oversight of Crypto Firms
The regulator made it clear that no cryptocurrency firm should employ terminology commonly associated with traditional banks to attract clients. The HKMA highlighted:
“Under the Banking Ordinance, only licensed banks, restricted licence banks, and deposit-taking companies (collectively known as ‘authorized institutions’), which have been granted a licence by the HKMA, can carry out banking or deposit-taking business in Hong Kong.”
The HKMA emphasized that unauthorized institutions using the term “bank” or making any representation that they are conducting banking activities in Hong Kong are committing an offense.
Meanwhile, the HKMA issued a reminder to residents of Hong Kong that, since it does not oversee cryptocurrency firms, any funds placed with these entities are not protected by the Hong Kong Deposit Protection Scheme. The regulator urged residents to verify the status of deposit-taking firms by consulting “the register of authorized institutions on the HKMA’s website.”
This development underscores the HKMA’s commitment to ensuring the integrity of the financial sector in Hong Kong and protecting the interests of the public by preventing deceptive practices in the cryptocurrency space.
Frequently Asked Questions (FAQs) about Cryptocurrency Regulations
What prompted the warning from the Hong Kong Monetary Authority (HKMA) to cryptocurrency firms?
The HKMA issued a warning to cryptocurrency firms because they were falsely portraying themselves as banks, which is a violation of Hong Kong’s Banking Ordinance. The HKMA was concerned that such misrepresentations could mislead the public.
What specific actions did the HKMA instruct cryptocurrency firms to take?
The HKMA instructed cryptocurrency firms to cease labeling themselves as banks and to avoid characterizing their products as “deposits.” They were warned against using terminology associated with traditional banks to attract clients.
What are the potential consequences for crypto firms that continue to pose as banks in Hong Kong?
Cryptocurrency firms that continue to misrepresent themselves as banks or engage in banking activities without the proper authorization are committing an offense under the Banking Ordinance.
How does the HKMA emphasize the limited oversight of crypto firms in Hong Kong?
The HKMA emphasized that it does not supervise cryptocurrency firms in Hong Kong. As a result, funds placed with these firms are not protected by the Hong Kong Deposit Protection Scheme. Residents are encouraged to verify the status of deposit-taking firms through the HKMA’s register of authorized institutions.
What is the main message conveyed by the HKMA’s warning to crypto firms?
The primary message is that cryptocurrency firms must refrain from using misleading descriptions and terminology associated with banks, as this can deceive the public and is a breach of the Banking Ordinance. The HKMA aims to protect the integrity of the financial sector and safeguard public trust.
More about Cryptocurrency Regulations
- Hong Kong Monetary Authority
- Hong Kong Banking Ordinance
- HKMA Register of Authorized Institutions
- Cryptocurrency Regulations in Hong Kong