Hong Kong’s financial regulatory authority, the Hong Kong Monetary Authority (HKMA), has issued a warning to crypto firms operating in the country that it is illegal for them to market themselves as banks or deposit-taking businesses if they are not licensed to do so. The HKMA stated that only authorized institutions, such as licensed banks and deposit-taking companies, are allowed to carry out banking or deposit-taking business in Hong Kong.
The regulator’s warning comes as part of its efforts to enforce the Banking Ordinance, which prohibits unlicensed companies or platforms from referring to themselves as banks. It also restricts the use of terms like digital bank, crypto bank, crypto asset bank, digital trading bank, and digital asset bank by crypto firms.
Additionally, the HKMA warned against using misleading descriptions such as “savings plans” or promoting services as “low risk” or “high return.” These terms could mislead the public into believing that these crypto firms are authorized banks in Hong Kong and that their funds are protected under the Hong Kong Deposit Protection Scheme. However, since crypto firms are not recognized or regulated as banks in Hong Kong, funds placed with them do not enjoy this protection.
The warning comes as Hong Kong continues to establish itself as a prominent hub for the crypto industry. Many crypto companies, including exchanges, have sought regulatory approval to offer their services in the jurisdiction. Earlier this year, the Hong Kong government unveiled a crypto framework aimed at transforming the sector and promoting innovation.
However, while the crypto sector is being embraced in Hong Kong, the Securities and Futures Commission (SFC) has also cautioned exchanges and providers against misrepresenting their regulatory status. The SFC has urged these entities to refrain from offering services or products to investors before completing the necessary regulatory processes or offering services outside the boundaries of the law.
Overall, the HKMA’s warning serves as a reminder to crypto firms operating in Hong Kong that they must adhere to the laws and regulations governing the banking industry. By clarifying that only licensed banks can engage in deposit-taking activities, the regulator aims to protect the public from potential risks associated with unregulated financial entities and ensure the integrity of the financial system in Hong Kong.