Thursday, February 29, 2024

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    Hong Kong Warns Crypto Firms Against Misleading Use of Banking Terminology

    HKMA Cautions Crypto Companies Using Banking Jargon May Violate Banking Laws, Warns Consumers of Lack of Regulatory Oversight

    The Hong Kong Monetary Authority (HKMA), the central bank of Hong Kong, has issued a warning to consumers about crypto companies that present themselves as financial institutions and use banking terminology, potentially violating the region’s banking laws.

    In a news release, the HKMA expressed concern that the use of specific banking terms by crypto businesses might mislead the public into believing that these entities are licensed financial institutions in Hong Kong. In reality, many of these companies do not have authorization to conduct banking or deposit-taking activities in the region.

    The central bank emphasized that companies referring to themselves as “crypto bank,” “digital asset bank,” “crypto asset bank,” or offering banking services or accounts may be in breach of regulations. According to the HKMA, unless a company is duly licensed, individuals and organizations are prohibited from using the term “bank” in their business names or descriptions. Providing financial services without proper licensing also constitutes a violation of regulations.

    Furthermore, the HKMA clarified that crypto companies that are not actual banks are not subject to regulatory oversight by the central bank. Consequently, funds deposited with these so-called “crypto banks” do not enjoy the protection offered by the region’s deposit protection scheme.

    This warning follows Hong Kong’s recent crackdown on violations of licensing laws. On September 15, the Securities and Futures Commission (SFC) issued a warning against crypto exchange JPEX for allegedly advertising its products and services in Hong Kong without obtaining the necessary license or registration.

    Subsequently, exchange personnel reportedly disappeared from their Token 2049 booth in Singapore. In response to the warning, the exchange also raised its withdrawal fees to a significant level, aiming to deter customers from withdrawing their funds from the platform.

    As Hong Kong strengthens its regulatory measures, consumers and investors are urged to exercise caution and due diligence when engaging with crypto-related businesses, especially those that use misleading banking terminology.

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