Hong Kong Steps Up Crypto Regulation with Warnings to Imitation Banks – Here's What You Need to Know
Today, the Hong Kong Monetary Authority (HKMA) issued a warning to cryptocurrency companies that improperly use the term "bank" in describing their services.
The authority stated that such wording wrongly suggests these companies are regulated by the HKMA, which is not the case. According to HKMA rules, only organizations with specific licenses can operate as banks in Hong Kong.
"Under the Banking Ordinance, only licensed banks, restricted license banks and deposit-taking companies, which have been granted a license by the HKMA can carry out banking or deposit-taking business in Hong Kong," the HKMA clarified in its statement.
Crypto companies are also not allowed to compare their services to traditional banking services, nor can they encourage customers to open "banking accounts" or label their offerings as "deposits."
Regulatory Actions on Misleading Crypto Companies
This alert from the HKMA follows another from the Hong Kong Securities and Futures Commission (SFC) targeting a crypto trading platform known as JPEX. The SFC criticized JPEX for using terms like "crypto 'deposits,' 'savings,' or 'earnings,' which are not permitted under the SFC's oversight framework for crypto trading platforms."
The SFC also rebuked JPEX for portraying itself as a licensed entity, despite not having applied for or received any such license.
In a similar vein, back in August, the SFC warned the public about unlicensed crypto platforms that were involved in questionable activities. According to the SFC, platforms that claim to have applied for licenses "may not be in compliance with the legal and regulatory requirements under the new regime."
Misrepresenting a company as a licensed entity when it has not received authorization is also an offense, much like the misuse of the term "bank" by crypto companies.
The Changing Landscape of Hong Kong Crypto Regulation
Earlier this year, Hong Kong made several moves to become more welcoming to crypto businesses, including the initiation of a Central Bank Digital Currency (CBDC) trial. Yet, as these recent warnings indicate, the authorities are taking a balanced approach to crypto regulation, ensuring that companies do not mislead the public or operate outside the bounds of established regulations.
In short, while Hong Kong has made efforts to become more accommodating to crypto businesses, the recent actions by HKMA and SFC show that they are not letting their guard down in terms of crypto regulations. The authorities are diligently working to ensure that the public is not misled by companies operating in the hong kong crypto market.