key takeaways:
- HKMA warns crypto firms against misleading terminology usage.
- Only HKMA-licensed institutions can legally offer banking services in Hong Kong.
The world of cryptocurrencies and digital assets is continually evolving, presenting exciting opportunities and unique challenges. Hong Kong has been a hub for crypto-related activities, but recently, the Hong Kong Monetary Authority (HKMA) issued a stern warning about misleading terminology used by crypto companies.
The HKMA’s Warning: What’s It All About?
In a recent statement, the HKMA expressed concern over cryptocurrency-related companies using misleading terminology, specifically those that portray themselves as “banks” and their services as “deposits.”
Misleading Terminology :
The HKMA has taken issue with crypto firms employing certain banking terms, as it believes that this could mislead the public into thinking that these entities are authorized banks in Hong Kong. This is an important distinction because, under Hong Kong’s banking laws, only licensed institutions are permitted to conduct banking or deposit-taking businesses in the city.
The Offending Titles:
The HKMA’s alert was prompted by its discovery of numerous crypto firms in Hong Kong using titles such as “crypto bank,” “digital asset bank,” “crypto asset bank,” “digital bank,” or “digital trading bank.” According to regulators, these designations violate Hong Kong’s Banking Ordinance and could create a false impression that these crypto businesses are authorized banks capable of safeguarding individuals’ savings.
The use of misleading terminology carries legal consequences. Under the Banking Ordinance, only licensed banks, restricted licence banks, and deposit-taking companies, collectively known as “authorized institutions,” are allowed to carry out banking or deposit-taking business in Hong Kong. It is a legal offense for any person or entity to use the word “bank” in their business name or description or to represent themselves as a bank in Hong Kong.
Moreover, it is also an offense for anyone to operate a business that involves taking deposits in Hong Kong or soliciting the public to make deposits without proper authorization.
One crucial aspect highlighted by the HKMA’s warning is that crypto firms in Hong Kong that are not authorized banks are not supervised by the HKMA. Consequently, funds placed with these entities are not protected by the Hong Kong Deposit Protection Scheme.
