The Hong Kong Monetary Authority (HKMA) has issued a public advisory warning against crypto businesses that are presenting themselves as “banks” or labeling their products as “deposits”.
The regulatory body emphasizes that such misrepresentations may violate the Banking Ordinance.
There have been instances of crypto firms branding themselves with terms such as “crypto bank”, “crypto asset bank”, and “digital trading bank”, HKMA noted.
Additionally, these crypto firms have been promoting “savings plans” as “low risk” with “high return”, potentially misleading the public into believing that these firms are authorized banks in Hong Kong, where they can securely save their funds.
The HKMA highlights that only entities like licensed banks, restricted licence banks, and deposit-taking companies, which are collectively termed “authorized institutions” and have been granted a licence by the HKMA, are permitted to operate banking or deposit-taking activities in Hong Kong.
Any other entity using the term “bank” in their business name or suggesting that they offer banking services in Hong Kong is committing an offence, the central bank said. The same applies to any entity that runs a business of taking deposits in Hong Kong or invites the public to make a deposit.
Crypto firms that are not officially recognized as banks in Hong Kong are not supervised by the HKMA. Consequently, funds placed with these firms are not shielded by the Hong Kong Deposit Protection Scheme.
The HKMA urges the public to exercise caution. Should there be any uncertainties regarding an entity claiming to be a bank or seeking deposits in Hong Kong, individuals are advised to consult the register of authorized institutions on the HKMA’s website. If doubts persist, individuals can contact the HKMA’s Public Enquiry Service hotline at 2878 8222.
According to section 97 of the Banking Ordinance, only a bank or a central bank can use the term “bank” or its derivatives in its business name in Hong Kong without the HKMA’s written consent.
Under sections 11 and 12 of the Banking Ordinance, only an entity with a valid banking licence or recognized as an authorized institution can engage in banking or deposit-taking activities in Hong Kong.
As per section 92 of the Banking Ordinance, only an authorized institution can issue an advertisement inviting the public to make a deposit, with certain exceptions.