The Hong Kong Monetary Authority (HKMA) has issued a warning to crypto firms that are using banking terms to describe their services or products, saying that they may be breaking the law and misleading the public.
Crypto firms are not banks in Hong Kong
The HKMA said that it has noticed some crypto firms using terms such as “crypto bank”, “crypto asset bank”, “digital asset bank”, “digital bank” or “digital trading bank” to present themselves as banks or claim to offer banking services or accounts. Some crypto firms also use the word “deposits” to describe funds placed with them by clients, or promote “savings plans” as “low risk” with “high return”.
The regulator said that these descriptions may mislead the public into thinking that these crypto firms are banks authorized in Hong Kong, to which they can entrust their savings. However, the HKMA stressed that crypto firms are not banks in Hong Kong and are not supervised by the HKMA. Funds placed with them are not protected by the Hong Kong Deposit Protection Scheme.
Only authorized institutions can carry out banking business in Hong Kong
The HKMA reminded the public that 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. Other than authorized institutions, it is an offence for any person to use the word “bank” in the name or description under which they carry on business, or make any representation that they are a bank or carrying on banking business in Hong Kong. It is also an offence for any person to carry on a business of taking deposits in Hong Kong or invite members of the public to make any deposit.
The HKMA advised the public to verify whether an entity is authorized to conduct banking business by referring to the register of authorized institutions on the HKMA’s website. If in doubt, the public can call the HKMA’s Public Enquiry Service hotline (2878 8222).
HKMA is exploring regulatory approach for crypto-assets and stablecoins
The HKMA also said that it is exploring the appropriate regulatory approach for crypto-assets and stablecoins, and has issued a discussion paper on this topic in January 2023. The regulator said that it welcomes views from the industry and public on the relevant issues and proposals.
The HKMA said that it will continue to monitor the developments and risks of crypto-assets and stablecoins, and will work with other regulators and stakeholders to enhance consumer protection and financial stability.
