The world of cryptocurrency is a realm of innovation and opportunity. But within this digital frontier, a word of caution emerges from the Hong Kong Monetary Authority (HKMA). They’re raising the alarm about crypto businesses that, in a daring twist, purport to be “banks.” Let’s delve into this unfolding saga.
The Deceptive Descriptions
In a press release that rings with urgency, the HKMA unveils a concerning trend. It seems that some crypto firms operating in Hong Kong have taken to using terms like “crypto bank,” “crypto asset bank,” “digital asset bank,” “digital bank,” or “digital trading bank” to describe themselves. They also boldly claim to offer “banking services” or “banking accounts.”
Misleading the Masses
The real concern here is that these descriptions are misleading the public into believing that these crypto entities are bona fide banks authorized to operate in Hong Kong. Regulators have also flagged instances where crypto firms employ the word “deposits” to describe funds entrusted to them by clients. Additionally, some promote “savings plans” with enticing labels like “low risk” and “high return.”
The Legal Framework
The HKMA’s warning is not without foundation. Under the Banking Ordinance, only licensed banks, restricted license banks, and deposit-taking companies granted a license by the HKMA can conduct banking or deposit-taking business in Hong Kong. It’s a robust regulatory framework designed to safeguard the interests of the public.
The Use of the “Bank” Label
In Hong Kong, it is explicitly unlawful for individuals or businesses other than authorized institutions to incorporate the word “bank” in their company names or descriptions. The reason is simple: to prevent confusion and maintain the integrity of the banking sector.
A Wake-Up Call
With this alert, the HKMA delivers a vital reminder to the public. Crypto firms that parade as “banks” in Hong Kong are operating outside the purview of the HKMA’s supervision. Consequently, funds entrusted to them are not covered by the Hong Kong Deposit Protection Scheme.
In conclusion, as the crypto landscape continues to evolve, it’s crucial to keep a vigilant eye on the fine print. The allure of potentially high returns should never overshadow the importance of verifying the legitimacy of financial entities. In the world of crypto, as in life, it pays to be cautious and well-informed.