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Crypto firms in Hong Kong have received a stern warning from the Hong Kong Monetary Authority (HKMA), urging them to refrain from using the term “bank” in their operations unless they hold the status of an authorized institution.
The regulatory announcement addresses growing concerns about misleading terminology adopted by certain cryptocurrency companies, including self-designations as crypto banks, digital asset banks, or digital trading banks.
In a press release, the HKMA highlighted the alarming trend of certain digital entities using the term “deposits” when referring to funds entrusted to them by clients. The financial regulator made it clear that such practices constitute a gross violation of Hong Kong’s banking laws. The warning underscores the need for transparency and accurate representation in an industry where trust is paramount.
A Gross Violation Of Banking Laws
The timing of this warning coincides with the unfolding liquidity crisis at JPEX, a cryptocurrency exchange heavily marketed in Hong Kong. The Securities and Futures Commission (SFC), another regulatory body in the region, recently issued a warning against JPEX for operating without a license. This incident has further highlighted the importance of regulatory oversight in the digital currency space.
Total crypto market cap at $1.05 trillion on the daily chart: TradingView.com
The HKMA emphasized that funds placed with entities misrepresenting themselves as banks were not covered by the Hong Kong Deposit Protection Scheme. To protect their interests, the public has been strongly advised to consult the list of authorized institutions available on the HKMA’s official website. This step is crucial to ensure that investors’ funds are placed in secure and regulated financial institutions.
Diverging From China’s Stringent Crypto Stance
Hong Kong, as a special administrative region, has diverged from mainland China’s strict stance on digital assets. Instead, it has positioned itself as a welcoming destination for crypto companies looking to establish a presence in the country. The region has been actively striving to become a global crypto hub, capitalizing on the potential growth of Web3 technologies.
In addition to regulatory measures, a task force has been established to support the development of Web3 technologies in Hong Kong. This proactive approach reflects the region’s commitment to fostering innovation while maintaining a vigilant stance on investor protection and regulatory compliance.
The HKMA’s warning serves as a clear message to cryptocurrency firms operating in Hong Kong: accurate representation and adherence to regulatory standards are non-negotiable.
As the crypto industry mindfully stirs its path to development, maintaining the trust of investors and regulators is essential for sustainable growth and the realization of Hong Kong’s vision as a global crypto hub.
Featured image from Hodlnaut