HKMA Issues Warning Against Fraudulent Crypto Firms Misrepresenting as Banks
On November 15, 2024, the Hong Kong Monetary Authority (HKMA) issued a warning regarding two overseas cryptocurrency firms that misrepresented themselves as banks. This action aligns with local authorities' efforts to protect consumers and ensure transparency in Hong Kong's growing crypto market.
HKMA Cracks Down on Misleading Crypto Firms
The HKMA revealed that one crypto firm falsely claimed to be a bank while another incorrectly labeled its card as a “bank card” on its website. These misrepresentations have raised concerns about consumer deception regarding the firms’ regulatory status under HKMA oversight.
“The HKMA is concerned that such claims by these firms mislead consumers to believe they are licensed banks in Hong Kong and are under the HKMA’s supervision, and such products and services are provided by licensed banks in Hong Kong. [...] Such acts may constitute a contravention of the Banking Ordinance,” HKMA stated.
The Banking Ordinance specifies which institutions can operate as banks in Hong Kong. Only entities licensed by the HKMA, such as licensed banks, restricted license banks, and deposit-taking companies, are authorized to conduct banking activities. The law also prohibits any business from using the term "bank" unless it holds the appropriate license.
The HKMA indicated that the use of "bank" by crypto firms misleads the public and breaches regulations. Legal action may ensue against these companies for misrepresenting themselves as licensed financial entities in Hong Kong.
Hong Kong's Crypto Regulations Strengthen Market Trust
Hong Kong has positioned itself as a significant global hub for cryptocurrency, gaining momentum in recent years. In June 2023, the city implemented a licensing regime to regulate crypto trading platforms while encouraging innovation in the digital asset sector. Licensed crypto firms must adhere to stringent guidelines to protect consumers.
The crackdown on the two crypto firms reflects broader efforts by the HKMA to strengthen control over the crypto market. By addressing fraud and deceptive practices, the authority aims to maintain trust within the financial system.