The Hong Kong Monetary Authority (HKMA) has warned virtual asset institutions against falsely claiming to be “crypto banks,” “virtual asset banks,” “digital asset banks,” “digital banks,” or “digital transaction banks” on its website.
These institutions must refrain from promoting their services as “banking services” or “bank accounts,” using the term “deposit” to depict customer funds, and advertising “savings plans” as having “low risk” and offering “high returns.”
The warning issued by the HKMA emphasizes that such practices could potentially breach the Banking Ordinance.
This ordinance permits only entities with licenses from the HKMA, specifically licensed banks, restricted license banks, and deposit-taking companies collectively referred to as “authorized institutions,” to engage in banking operations and accept deposits in Hong Kong.
Furthermore, the ordinance explicitly states that anyone who is not an authorized institution and operates under the name “bank” or implies involvement in banking activities in Hong Kong commits a criminal offense.
Accepting deposits from the public without proper authorization is also deemed unlawful.
In addition, the HKMA has reminded the public that virtual asset institutions not recognized as Hong Kong banks are not subject to the HKMA’s regulatory oversight.
Consequently, the Hong Kong Deposit Protection Scheme does not cover funds deposited with such institutions or platforms.
This underscores the importance of exercising due diligence and adopting cautious investment practices within the virtual asset sector.
The resolute position taken by the HKMA serves as a safeguard against deceptive practices within the virtual asset industry, with the primary goal of protecting consumers and maintaining the integrity of the banking sector in Hong Kong.
Despite recent encouragement from Hong Kong’s banking regulator, banks remain hesitant to collaborate with cryptocurrency exchanges due to concerns about potential legal repercussions related to money laundering and other illicit activities.
