In a move to safeguard the interests of investors and maintain the integrity of its financial system, Hong Kong's central bank has issued a stern warning against cryptocurrency businesses that label themselves as "banks". The Hong Kong Monetary Authority (HKMA) emphasized that such nomenclature could mislead the public, potentially leading them to believe that these entities are authorized banking institutions within the region.
The HKMA's announcement comes at a time when the global cryptocurrency market is witnessing unprecedented growth, with new businesses and platforms emerging rapidly. However, the use of terms like "digital bank" and "crypto bank" by these entities has raised concerns. The HKMA clarified that such descriptions could create a false sense of security among potential investors, making them believe that these crypto firms are authorized banks in Hong Kong, thereby entrusting them with their savings.
The banking laws in Hong Kong are clear: only entities with the necessary licenses are allowed to undertake banking activities and manage deposits. The HKMA stated, "Other than authorized institutions, it is a misconduct for an entity 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." Furthermore, it is illegal for any individual or entity to operate a deposit-taking business without proper authorization or to solicit deposits from the public.
For those looking to verify the legitimacy of a crypto business, the HKMA has advised them to consult the register of approved institutions available on its official website.
This warning is not an isolated incident. Hong Kong has been proactive in ensuring that its licensing laws are adhered to. Recently, the Hong Kong Securities and Futures Commission (SFC) highlighted that any applicants found violating essential regulations might not be granted a license under the new framework for retail crypto trading in the city. The SFC has observed several unlicensed cryptocurrency exchanges indulging in questionable practices within the city's jurisdiction.
Despite China's stringent stance on cryptocurrencies, Hong Kong is striving to establish itself as a leading global hub for the crypto industry. The region has rolled out several guidelines to foster a conducive environment for crypto businesses. Moreover, it encourages traditional banks to collaborate with crypto firms. Following the introduction of Hong Kong's new licensing system on June 1, HashKey and OSL emerged as the first two exchanges to receive approval for retail trading in the city.
As the crypto landscape continues to evolve, regulatory clarity and investor protection remain paramount. Hong Kong's recent actions underscore its commitment to ensuring a transparent and secure environment for both businesses and investors in the crypto domain.
