The Hong Kong Monetary Authority (HKMA) cautioned the public about certain overseas crypto firms misusing the word “bank” in their marketing and descriptions.
On 15 November 2024 HKMA said, “Only licensed banks, restricted license banks, and deposit-taking companies authorized by the HKMA are permitted to conduct banking or deposit-taking activities in the region.”
Alert: Please be cautious about crypto firms which may have misused the word “bank”. Certain overseas crypto firms, in recent events in HK, were reported to have made the representation that the firm was a “bank” or offered card product as “bank card” on the firm’s website. pic.twitter.com/Va5ebhhbTI
— HKMA 香港金融管理局 (@hkmagovhk) November 15, 2024
Misusing Term “Bank” Raises Concerns; Could Mislead Consumers
The HKMA reportedly identified incidents involving two overseas crypto firms that made misleading representations in Hong Kong.
Allegedly, one of the firms described itself as a “bank,” while the other referred to its card product as a “bank card” on its website.
The HKMA expressed concerns around misleading consumers into believing that the firms are licensed banks operating under supervision. “Such representations could mislead consumers to believe they are licensed banks in Hong Kong and are under the HKMA’s supervision,” HKMA said.
Furthermore, using the term “bank” in names or product descriptions without the authority’s written consent could potentially be a criminal offence for entities, revealed HKMA. “Under section 97 of the Banking Ordinance, no person, other than a licensed bank in Hong Kong or a central bank, may use the word ‘bank’ or its derivatives.”
The strict regulatory framework is being enforced to ensure the public is not misled by unauthorized entities posing as legitimate banks.
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Crypto Firms That Are Not Authorized Institutions, Are Not Supervised By HKMA
The HKMA provided resources to verify authorized institutions. This encourages consumers to consult the HKMA’s register of authorized institutions or contact its Public Enquiry Service hotline for clarification.
Additionally, the HKMA reiterated its commitment to protect the public from misleading practices. It is to ensure a clear distinction between licensed banks and unauthorized entities. The authority said, “Products or services with names carrying the word ‘bank’ are not necessarily provided by licensed banks in Hong Kong.”
With these measures, HKMA is aiming to mitigate potential risks posed by unauthorized entities in the growing crypto sector.
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Hong Kong’s Evolving Crypto Landscape
Hong Kong is trying to position itself as a global leader in digital finance by introducing a robust regulatory framework for virtual assets.
Backed by the institutions like the HKMA, the city is cultivating a thriving digital asset ecosystem and advancing innovation in the Web3 sector.
One of its major initiatives include a forthcoming stablecoin regulatory framework, prioritizing fiat-backed stablecoins to ensure financial stability.
The legislation is set to be introduced by the end of 2024.
Recently, in August, 2024, the HKMA had launched Project Ensemble Sandbox (the Sandbox), enabling interbank settlements through experimental tokenized money, with an emphasis on transactions involving tokenized assets.
Moreover, by combining stablecoins with broader efforts like Project Ensemble, Hong Kong is building a comprehensive framework for digital asset integration.
Meanwhile, the HKMA has advanced its e-HKD pilot program to phase 2, collaborating with over 20 firms, including prominent entities like HSBC, Visa, Standard Chartered and DBS. This initiative explores the practical use cases of a Central Bank Digital Currency (CBDC).
The forward-looking approach aligns Hong Kong with global trends in digital currency adoption.
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