Hong Kong warns that crypto firms are not “banks”

• Hong Kong warns crypto firms against using the word “bank”
• The Hong Kong Monetary Authority (HKMA) says only licensed banks can take “deposits.”
• Using terms such as digital bank, crypto bank and crypto asset bank contravenes the Banking Ordinance.

The Hong Kong Monetary Authority (HKMA) has warned crypto firms that it’s against the law for any unauthorised company or platform to refer themselves as a “bank”, or deposit-taking businesses. 

Hong Kong regulation prohibits this, HKMA noted.

Only licenced banks can take deposits

HKMA’s warning noted that firms taking such an approach to their marketing to the public are contravening the Banking Ordinance. The regulator notified the public to be aware of this fact, while crypto firms were reminded that only HKMA-licensed providers can use the term bank or take deposits from the public.

“Under the Banking Ordinance, only licensed banks, restricted licence banks and deposit-taking companies (collectively known as “authorised institutions”), which have been granted a licence by the HKMA can carry out banking or deposit-taking business in Hong Kong,” the regulator warned via a press release published on Friday.

Among terms the Hong Kong financial markets watchdog cautioned crypto firms not to use or describe themselves include digital bank, crypto bank, crypto asset bank, digital trading bank and digital asset bank. Unlicenced firms should also not claim to offer banking accounts or banking services, as well as describing funds sent to accounts with the companies as “deposits.”

Such terms as “savings plans” or “low risk” and “high return” are also not allowed under the law for such unauthorised platforms. 

“These descriptions may mislead members of the public into believing that those crypto firms are banks authorised in Hong Kong, to which they can entrust their savings,” HKMA noted.

According to the regulatory authority, crypto firms are not approved and regulated as banks in Hong Kong. HKMA does not also supervise these platforms, which means funds that people place with these entities do not benefit from the Hong Kong Deposit Protection Scheme.

Exchanges warned against illegal services

Hong Kong is one of the fastest-growing crypto hubs in the world and many crypto companies, including exchanges, have looked to secure regulatory approval to offer products and services there. 

The Hong Kong government’s recent unveiling of a crypto framework aimed at transforming the crypto sector has been lauded by many crypto industry players.

But while the jurisdiction opens up the financial hub to crypto, Hong Kong’s Securities and Futures Commission (SFC) recently warned exchanges and other providers against misrepresenting their regulatory status. The regulator also asked exchanges not to offer services and products to investors before completing the process, or extending services not allowed under the law.