FameEX Hot Topics | Hong Kong's Central Bank Advises Caution Regarding Cryptocurrency Firms Employing Banking Terminology

The Hong Kong Monetary Authority (HKMA) has taken a proactive stance by issuing a strong cautionary message to the public. Their concern centers on crypto businesses that masquerade as banks, utilizing banking terminology, and potentially infringing upon the region's stringent banking laws. This advisory is a significant step in the HKMA's ongoing efforts to safeguard consumers and uphold the integrity of Hong Kong's financial sector.

In a recently released press statement, the HKMA articulated its apprehensions regarding the use of specific banking terminology by cryptocurrency firms. Such terminology could easily mislead the public into believing these entities possess the necessary authorization to operate as banks within Hong Kong. It's paramount to understand that, in accordance with Hong Kong's banking laws, only licensed institutions are permitted to engage in banking activities or accept deposits within the jurisdiction.

The HKMA has underscored that companies adopting monikers like "crypto bank," "digital asset bank," or "crypto asset bank," or professing to provide banking services or accounts, might be in direct violation of the law. Furthermore, the HKMA has made it abundantly clear that, except for authorized institutions, it is illegal for individuals or businesses to incorporate the term "bank" within their company names or descriptions. Engaging in deposit-taking activities without the requisite license is also unequivocally forbidden.

A pivotal point emphasized by the HKMA is that unlike traditional banks, crypto firms operate outside the scope of its regulatory oversight. Consequently, funds entrusted to these so-called "crypto banks" do not enjoy the protection afforded by Hong Kong's deposit protection scheme. This glaring absence of protection leaves users exposed to the inherent risks associated with the volatile cryptocurrency market.

Hong Kong has been resolutely addressing violations of its licensing laws, a testament to its unwavering commitment to maintaining a resilient and compliant financial landscape. A recent instance of this commitment transpired on September 15 when the region's Securities and Futures Commission (SFC) issued a stern warning against JPEX, a crypto exchange. The warning was prompted by allegations of JPEX promoting its products and services within Hong Kong without having obtained the requisite license or even commenced the application process.

In summary, the HKMA's recent warning serves as a poignant reminder of the paramount importance of regulatory compliance within the swiftly evolving cryptocurrency arena. It unequivocally emphasizes the need for consumers to exercise due diligence and caution when engaging with entities that employ banking terminology but lack the necessary licenses. By staying well-informed and remaining vigilant, individuals can substantially enhance their ability to safeguard their financial interests within the realm of cryptocurrencies, particularly in jurisdictions like Hong Kong, which place a premium on regulatory adherence and consumer protection.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.