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FameEX Hot Topics | Hong Kong Regulatory Authority Asserts Crypto Companies Posing as Banks Violate Banking Regulations

2023-09-21 16:24:40

The Hong Kong Monetary Authority (HKMA) issued a significant announcement on September 10th, addressing the growing concerns surrounding cryptocurrency firms masquerading as banks and offering what they label as "deposits." The HKMA sternly contends that these actions directly contravene the region's Banking Ordinance and, more alarmingly, have the potential to mislead the public, creating a false sense of trust in these crypto entities.

In a follow-up statement released on September 15th, the HKMA urged crypto enterprises to cease their deceptive practices immediately. It expressed its awareness of several crypto businesses that have taken on the facade of crypto asset banks and digital banks. Furthermore, the regulator explicitly warned crypto firms that claim to provide banking services or the opportunity to open banking accounts. The HKMA stressed that such misleading portrayals can lead members of the public to erroneously believe in the financial credibility and stability of these crypto firms.

Underlying this cautionary stance is a critical principle: the HKMA asserts that no crypto firm should exploit terminology commonly associated with traditional banks when attracting prospective clients. This assertion is grounded in the Banking Ordinance, which exclusively grants licensed banks, restricted license banks, and deposit-taking companies the right to conduct banking or deposit-taking activities within Hong Kong, subject to approval by the HKMA.

The regulator went a step further by declaring that any unauthorized entities that employ the term "bank" or make representations implying they are engaged in banking activities within Hong Kong are committing a legal offense.

Additionally, the HKMA used this opportunity to remind Hong Kong residents of a vital point: as it does not oversee or regulate cryptocurrency firms, any funds placed in their care are not covered by the Hong Kong Deposit Protection Scheme. This means that investors and customers should exercise caution and due diligence when dealing with crypto entities. To ascertain the legitimacy and status of a deposit-taking entity, the HKMA recommended referring to the "register of authorized institutions on the HKMA's website."

In essence, the HKMA's declarations serve as a robust cautionary signal to the rapidly evolving cryptocurrency sector in Hong Kong. The regulator is determined to protect the interests of the public by upholding the integrity of financial terminology and ensuring that those who engage in financial activities adhere to the established legal framework.

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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