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FameEX Hot Topics | Hong Kong's Central Bank Cautions Against Cryptocurrency Companies Utilizing Banking Terminology

2023-09-18 18:28:56

The Hong Kong Monetary Authority (HKMA) has issued a stern warning to the public, cautioning them about crypto businesses that present themselves as banks and employ banking terminology, potentially violating the region's banking laws. This advisory comes as part of the HKMA's efforts to protect consumers and maintain the integrity of Hong Kong's financial sector.

In a recent press release, the HKMA expressed its concerns regarding the use of specific banking terms by crypto firms, which could mislead the public into believing that these entities are authorized banks operating in Hong Kong. It is essential to clarify that, according to Hong Kong's banking laws, only licensed institutions are permitted to engage in banking or deposit-taking activities within the region.

The central bank emphasized that companies describing themselves using terms such as "crypto bank," "digital asset bank," or "crypto asset bank," or claiming to offer banking services or accounts, may potentially be in violation of the law. Furthermore, the HKMA clarified that, aside from authorized institutions, it is unlawful for individuals or businesses to incorporate the word "bank" in their company names or descriptions. Engaging in deposit-taking activities without the appropriate license is also deemed illegal.

One crucial point stressed by the HKMA is that crypto firms, unlike traditional banks, are not subject to its regulatory oversight. This means that funds deposited with these so-called "crypto banks" are not covered by Hong Kong's deposit protection scheme, leaving users exposed to potential risks associated with the volatile cryptocurrency market.

Hong Kong has been actively addressing violations of its licensing laws, demonstrating its commitment to maintaining a robust and compliant financial ecosystem. Just recently, on September 15, the region's Securities and Futures Commission (SFC) issued a warning against the crypto exchange JPEX. The warning pertained to allegations of JPEX promoting its products and services in Hong Kong without obtaining the necessary license or even initiating the application process.

In conclusion, the HKMA's latest warning serves as a reminder of the importance of regulatory compliance in the rapidly evolving crypto landscape. It underscores the need for consumers to exercise caution when dealing with entities that use banking terminology but lack the required licenses. By staying informed and vigilant, individuals can better protect their financial interests in the world of cryptocurrencies, particularly in jurisdictions like Hong Kong that prioritize regulatory adherence and consumer protection.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.

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