Hong Kong Tells Crypto Firms to Stop Calling Themselves Banks

Hong Kong’s ‘One Country, Two Systems’ Policy Boosts Virtual Asset Ecosystem

The Hong Kong Monetary Authority has warned the public about crypto businesses that claim to be banks and use banking terms in marketing material. The central bank warns these firms may be breaching the Banking Ordinance.

Striving to position itself as a worldwide center for cryptocurrency, Hong Kong has been making extensive efforts, ranging from attracting mainland China’s crypto companies to proposing the idea of trialing a digital dollar in its mortgage sector.

HK Monetary Authority Says Customers Can Misconstrue Terms

The HKMA highlighted that crypto companies are using terms including “crypto asset bank,” “digital asset bank,” “digital bank,” “banking services,” or “banking accounts,” that customers can misconstrue. According to Section 97 of the Banking Ordinance, only licensed banks, restricted license banks, and deposit-taking companies can legally use the term “bank.”

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Crypto Businesses Offer Outsized Returns Like Celsius

The offending businesses market returns that dwarf traditional bank accounts, making them attractive to the unsuspecting public. The collapse of crypto lender Celsius started with the company offering up to 18% returns with no apparent downside.

Its founder, Alex Mashinsky, styled himself as a type of Robinhood swooping in to save the public from banks. However, prosecutors allege he lied to the public about the company’s risk management and the business’s health.

Celsius filed for bankruptcy in July last year.

Hong Kong’s transaction volume grew 9.5% in 2022
Hong Kong’s transaction volume grew 9.5% in 2022 | Source: Chainalysis

JPEX Called Out for Fraudulent Marketing

On Wednesday, the Hong Kong Securities and Futures Commission warned investors against a crypto exchange called JPEX. The HKSFC accused it of “suspicious features” and of false claims about its license.

Read our guide to no-KYC exchanges here.

Several exchanges have already applied for licenses with the HKSFC after it passed new laws defining exchange capital requirements and asset custody.  According to the agency, JPEX was not one of them.

A spokesman for the HKMA said:

“No entity in the JPEX group is licensed by the SFC or has applied to the SFC for a license to operate a VATP in Hong Kong.”

The exchange’s website claims it is “determined to create an ideal Web3.0 community” and has “consistently complied with regulations and licensing systems in different regions.”

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In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content.

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