According to the HKMA, deposits held within unlicensed “crypto banks” do not enjoy the safeguards provided by the region’s deposit protection program.
By Pradeep Saran
Sep 17, 2023
The Hong Kong Monetary Authority (HKMA), the central bank of the special administrative region, has issued a stern warning to individuals and businesses involved in cryptocurrency activities that employ banking terminology or present themselves as banks. The HKMA emphasized that such practices could potentially violate Hong Kong’s banking laws and mislead the public.
In an official press release, the HKMA clarified that the use of specific banking terms might create confusion among consumers, leading them to believe that these crypto entities are authorized banks operating in Hong Kong. However, the HKMA underlined that, according to local banking laws, only licensed institutions are permitted to conduct banking or deposit-taking operations within the territory.
To prevent further confusion, the central bank cautioned the public about companies that describe themselves using terms like “crypto bank,” “digital asset bank,” or “crypto asset bank,” or claim to offer banking services or accounts. Such descriptions may run afoul of the law.
According to the HKMA, besides authorized institutions, it is unlawful for individuals or businesses to incorporate the word “bank” into their company names or descriptions. Moreover, facilitating deposit-taking without the requisite license is also a violation of the law.
The HKMA also took the opportunity to remind the public that crypto firms that do not possess banking licenses are not subject to its supervision. Consequently, funds deposited with these so-called “crypto banks” are not protected by Hong Kong’s deposit protection scheme.
This warning from the HKMA comes in the wake of increased regulatory scrutiny in Hong Kong regarding businesses that operate without proper licenses. Just recently, on September 15, the Securities and Futures Commission (SFC) of the region issued a warning concerning crypto exchange JPEX. The SFC alleged that JPEX had been promoting its products and services within Hong Kong without obtaining the necessary license or even applying for one.
In response to the SFC’s warning, JPEX’s staff unexpectedly disappeared from its Token 2049 booth in Singapore. Additionally, the exchange raised its withdrawal fees to a substantial 999 Tether USDT$1.00 in an apparent attempt to dissuade users from withdrawing their funds from the platform.