Key Points:
The Hong Kong Monetary Authority (HKMA) issues a warning to cryptocurrency companies, cautioning against the misuse of banking terminology, which may mislead the public into thinking these entities are authorized banks in Hong Kong.
Only licensed institutions are allowed to engage in banking or deposit-taking activities in Hong Kong, and the HKMA emphasizes that non-bank cryptocurrency companies are not regulated by the central bank, leaving funds held in “cryptocurrency banks” outside the protection of the regions deposit insurance scheme.
The Bank of Hong Kong has issued a caution to companies who trade in cryptocurrency to steer clear of using terminology that are typically associated with banking.
The Hong Kong Monetary Authority (HKMA), the central bank of the Hong Kong Special Administrative Region, has issued a stern warning to cryptocurrency companies against impersonating banks and employing banking terminology, cautioning that such practices could potentially violate the regions banking laws.
In a press release, the HKMA expressed concern that the use of specific banking terminology by crypto entities might mislead the public, creating the false impression that these companies are authorized banks operating within Hong Kong. It is important to note that, under the Hong Kong Banking Law, only licensed institutions are permitted to engage in banking or deposit-taking activities within the jurisdiction.
The central bank has specifically cautioned individuals and companies that employ terms like “crypto bank,” “digital asset bank,” or “crypto asset bank” to describe their services or purport to offer banking services or accounts. Such usage of terminology may constitute a breach of the law.
To underscore this point, the Hong Kong Monetary Authority has clarified that, except for authorized institutions, it is illegal for any person or business to incorporate the term “bank” within their company name or description. Furthermore, facilitating deposits without the requisite license is also a violation of the law.
Importantly, the HKMA wants the public to be aware that non-bank cryptocurrency firms do not fall under its regulatory oversight. Consequently, funds held within so-called “cryptocurrency banks” are not afforded the protection of the regions deposit insurance scheme.