HKMA Warns Crypto Firms Misrepresenting as Banks in Hong Kong

Highlights:

• The HKMA warns crypto firms misrepresenting as banks may be in violation of Hong Kong’s Banking Ordinance.
• The HKMA raised alarm after two overseas firms falsely represented themselves as banks.
• The use of the word ‘bank’ in the names or services of any institution is prohibited unless it is approved.

The Hong Kong Monetary Authority (HKMA) has warned overseas crypto firms misrepresenting as ‘banks’ in Hong Kong. These firms have been using the term “bank” in their names or product descriptions, potentially violating the local Banking Ordinance. These misrepresentations breach legal regulations and undermine the financial system.

Alert: Please be cautious about crypto firms which may have misused the word “bank”. Certain overseas crypto firms, in recent events in HK, were reported to have made the representation that the firm was a “bank” or offered card product as “bank card” on the firm’s website. pic.twitter.com/Va5ebhhbTI

— HKMA 香港金融管理局 (@hkmagovhk) November 15, 2024

How Crypto Firms are Misleading the Public

The HKMA recently learned of two overseas crypto firms operating in Hong Kong. One company claimed it was a ‘bank’ and the other advertised one of its products as a ‘bank card’ on its website. These claims may cause consumers to assume HKMA supervises these firms as licensed banks.

These practices can be confusing for customers and can harm the reputation of legitimate financial institutions. Concerned that customers may mistake rogue businesses for fully legitimate institutions, the HKMA wants to stop rogue businesses targeting customers. This misrepresentation leads customers engaging with unregulated entities that threaten their financial security However, the HKMA declined to name the two firms.

The banking business or deposit‐taking activities permitted in Hong Kong may only be conducted by authorized institutions, i.e., licensed banks, restricted license banks, and companies under the Banking Ordinance. Using the word ‘bank’ in a company’s name or business description in such an unauthorized manner is an offense. Such a law aims to protect consumers by offering banking services from only regulated entities.

Potential Legal Consequences

The HKMA stressed that these acts might constitute an infringement of the Banking Ordinance. Violators could be subject to fines and imprisonment. The authority is committed to implementing the law to ensure the integrity of Hong Kong’s financial system.

Meanwhile, being licensed to operate in other jurisdictions does not grant crypto firms the status of licensed as banks in Hong Kong. The HKMA clarified that only institutions authorized by the HKMA can represent themselves as banks. Crypto firms in Hong Kong must comply with local laws.

Additionally, the HKMA stated that it does not supervise crypto firms not authorized by the authority. Before investing, investors must exercise some caution and verify the licensing status of the institutions. The protection offered by authorized institutions may not be the same as that offered by unregulated entities.

HKMA’s Commitment to Consumer Protection

The HKMA is actively monitoring the situation and may act against firms that breach the Banking Ordinance. The authority urges the public to remain vigilant and promptly report suspicious activities or misrepresentations by financial entities. By enforcing regulations, the HKMA aims to safeguard consumers and preserve confidence in the financial system.

Hong Kong has embraced crypto firms via its newly established licensing framework for crypto trading platforms. Moreover, to safeguard consumers and ensure financial stability, the HKMA enforces stringent regulations. Only entities authorized by the HKMA may designate themselves as banks or offer banking services inside the region.