HKMA warns that misleading use of the word “bank” by crypto firms not only deceives consumers but also breaches Hong Kong’s Banking Ordinance.
On November 15, 2024, the Hong Kong Monetary Authority (HKMA), the region’s de facto central bank, issued a stern warning about two overseas cryptocurrency firms misrepresenting themselves as banks. The move comes as local authorities ramp up efforts to protect consumers and ensure transparency in Hong Kong’s burgeoning crypto market.
HKMA Cracks Down on Misleading Crypto Firms
The Hong Kong Monetary Authority (HKMA) issued a statement revealing that a crypto firm misrepresented itself as a bank, while another falsely labeled its card as a “bank card” on its website. This deception has raised significant concerns over misleading consumers into believing these firms operate as licensed banks under HKMA regulation.
“The HKMA is concerned that such claims by these firms mislead consumers to believe they are licensed banks in Hong Kong and are under the HKMA’s supervision, and such products and services are provided by licensed banks in Hong Kong. […] Such acts may constitute a contravention of the Banking Ordinance,” HKMA said.
The Banking Ordinance clearly defines which institutions are permitted to operate as banks in Hong Kong. Only entities licensed by the HKMA, such as licensed banks, restricted license banks, and deposit-taking companies, are authorized to carry out banking and deposit-taking activities. Additionally, the law prohibits any business from using the term “bank” in its name or services unless it holds the appropriate license.
The HKMA further stated that the use of “bank” by crypto firms not only misleads the public but also constitutes a breach of regulations. Legal action may follow for these companies, which could face consequences for misrepresenting themselves as licensed financial entities in Hong Kong.
Hong Kong’s Crypto Regulations Strengthen Market Trust
Hong Kong has strategically positioned itself as a prominent global hub for cryptocurrency, with increasing momentum in recent years. In June 2023, the city introduced a licensing regime designed to regulate crypto trading platforms while promoting innovation within the digital asset sector. This system mandates that licensed crypto firms follow stringent guidelines to ensure consumer protection.
The recent crackdown on two crypto firms reflects the broader efforts by the Hong Kong Monetary Authority to tighten control over businesses operating in the crypto market. By combating fraud and deceptive practices, the authority plays a pivotal role in preserving trust within the financial system.
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