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In a recent development, the Hong Kong Monetary Authority (HKMA) has cautioned cryptocurrency enterprises against using the designation “bank” inaccurately in their service descriptions.

The HKMA emphasized that such usage may erroneously imply that these firms are supervised by the HKMA, a misconception that is far from reality. Per the current regulations outlined by the HKMA, only entities possessing specific licenses are permitted to function as banks within the territory of Hong Kong.

“The use of banking terminology is strictly confined to licensed banks, restricted license banks, and deposit-taking entities that have secured a license from the HKMA to engage in banking or deposit-related activities in Hong Kong,” detailed the HKMA in an official communique.

Furthermore, cryptocurrency enterprises are prohibited from drawing parallels between their services and conventional banking offerings. They are equally barred from urging customers to inaugurate “banking accounts” or categorizing their products as “deposits.”

Enhanced Scrutiny on Crypto Businesses Utilizing Misleading Terminologies

The HKMA’s warning is in line with previous notifications from the Hong Kong Securities and Futures Commission (SFC), which recently flagged the crypto trading entity, JPEX. The SFC rebuked JPEX for its unauthorized use of terms such as “crypto ‘deposits,’ ‘savings,’ or ‘earnings,'” asserting that such terminology falls outside the sanctioned regulatory framework governing crypto trading platforms.

Additionally, the SFC lambasted JPEX for presenting itself as a certified entity without obtaining or even applying for the requisite licenses.

Previously, in August, the SFC had issued an advisory against unlicensed crypto platforms suspected of engaging in dubious practices. The SFC cautioned that even platforms that professed to have applied for licenses “might not fulfill the legal and normative prerequisites stipulated under the nascent regulatory structure.”

Falsely presenting a business as a licensed establishment, similar to the unwarranted use of the term “bank” by crypto organizations, is recognized as a legal violation.

Evolving Regulatory Dynamics in Hong Kong’s Crypto Sector

While Hong Kong has embarked on initiatives to foster a more crypto-friendly business environment, including the launch of a Central Bank Digital Currency (CBDC) pilot project earlier this year, the recent spate of warnings delineates a concerted effort to maintain a measured stance towards crypto regulation. These efforts are geared towards preventing potential public deception and ensuring businesses adhere to extant regulatory frameworks.

To sum up, Hong Kong’s concerted drive to facilitate crypto enterprises is coupled with a vigilant regulatory stance, as illustrated by the recent interventions by the HKMA and SFC. These governing bodies are committed to safeguarding the public from potential misinformation disseminated by entities operating in the city’s dynamic crypto landscape.